Providing Relief to Moderate and Low Income Buyers
For many first-time buyers and moderate-income families, saving for a down payment is the biggest barrier to homeownership. Luckily, two powerful loan programs—Fannie Mae’s HomeReady and Freddie Mac’s Home Possible—offer low down payment options, flexible credit requirements, and reduced mortgage insurance costs.
If you're searching for affordable mortgage programs, this guide will walk you through everything you need to know about HomeReady loans and Home Possible loans, how they work, their eligibility requirements, and how to choose between them.
What Are HomeReady and Home Possible Loans?
HomeReady (Fannie Mae)
The HomeReady mortgage is a conventional loan product offered by Fannie Mae, one of the government-sponsored enterprises (GSEs) that back much of the U.S. mortgage market. It was created to help low-to-moderate income borrowers purchase a home with as little as 3% down.
Key benefits include:
- Provides lower mortgage insurance premiums compared to standard conventional loans.
- Flexibility in income sources, including rental income and household income from relatives.
- Offers competitive interest rates that are often lower than traditional Conventional Mortgages.
- Credit score requirements as low as 620.
Home Possible (Freddie Mac)
The Home Possible mortgage is Freddie Mac’s answer to the same challenge: making homeownership more accessible. Like HomeReady, it allows for 3% down payments, reduced private mortgage insurance (PMI), and flexible underwriting.
Highlights include:
- Accepts co-borrowers who don’t live in the home (great for parents helping children).
- Specialized private mortgage insurance (PMI) that is lower in cost.
- Competitive mortgage rates that are typically lower than other Conventional Loans.
- Allows rental income from multi-unit properties.
- Similar 620 minimum credit score requirement.
Why These Programs Exist
The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, has long recognized the affordability challenges many families face. With rising home prices and stagnant wage growth, saving for a traditional 20% down payment is unrealistic for many.
Programs like HomeReady and Home Possible bridge the gap by:
- Lowering the upfront costs.
- Reducing monthly mortgage insurance premiums.
- Expanding income sources considered in underwriting.
This combination makes them ideal for first-time homebuyers, single parents, and households pooling income to afford a home.
Key Features of HomeReady and Home Possible
Both programs share many similarities. Here’s what they offer:
Low Down Payment (3%)
Both HomeReady and Home Possible allow buyers to purchase with just 3% down. On a $250,000 home, that’s only $7,500 upfront—much more attainable than a 20% down payment. These loans may be paired with the Virginia Housing DPA Grant or Second Plus to qualify for an even lower down payment of 0-1%.
Reduced Mortgage Insurance
Mortgage insurance protects lenders when borrowers put down less than 20%. Standard conventional loans often require higher PMI premiums. HomeReady and Home Possible, however, offer discounted PMI rates, which can save borrowers hundreds per year.
Cancellable Mortgage Insurance
Unlike FHA loans, PMI on these programs can be cancelled once you reach 20% equity. This makes them more cost-effective long term.
Flexible Income Sources
Both programs allow non-traditional income to count toward qualifying, including:
- Boarder or roommate income.
- Rental income from an accessory dwelling unit (ADU).
- Household member income, even if that person isn’t a co-borrower.
Education Requirement
HomeReady and Home Possible both require at least one borrower to complete a homeownership education course. This ensures buyers understand the responsibilities of owning a home.
Income Limits
Both programs are designed for low-to-moderate income borrowers, so income caps apply. Generally:
- Borrowers must have an income at or below 80% of the Area Median Income (AMI) for the property location.
- Exceptions exist in designated underserved areas where no income limit applies.
You can check your eligibility using Fannie Mae’s and Freddie Mac’s income lookup tools online.
As of September 2025, the HomeReady and HomePossible income limits for key CapCenter markets are as follows:
- Richmond, VA: $90,720
- Virginia Beach, VA: $85,280
- Raleigh, NC: $106,160
- Charlotte, NC: $87,040
- Charleston, SC: $88,720
Property Types Eligible
HomeReady and Home Possible allow financing for:
- 1-unit primary residences (including condos and townhomes).
- Manufactured homes (with some restrictions).
- 2-4 unit properties (with additional requirements).
Investment properties and second homes are not eligible.
Benefits Compared to FHA Loans
Many first-time buyers also consider FHA loans, which allow 3.5% down payments. However, HomeReady and Home Possible often come out ahead:
- Lower Mortgage Insurance Costs – FHA requires both an upfront and monthly premium, which can’t be cancelled unless you refinance. PMI on HomeReady/Home Possible is cheaper and removable.
- Higher Loan Limits – Since they’re conventional loans, borrowers can access higher loan amounts compared to FHA caps in many areas.
- Stronger Long-Term Affordability – The ability to remove PMI saves thousands over the life of the loan.
Steps to Qualify for HomeReady or Home Possible
Here’s the general process:
Step 1: Check Income Limits
Use the Fannie Mae or Freddie Mac AMI tool to verify you’re under the income cap for your area.
Step 2: Review Your Credit
Pull your credit report and check your score. While 620 is the minimum, a higher score improves your rate and terms.
Step 3: Save for Down Payment
Even though down payments can be as low as 3%, you’ll also need to budget for taxes, insurance, and prepaid interest. CapCenter covers all traditional closing costs, which usually cost you an extra 2-5% of your purchase price.
Step 4: Complete the Education Course
Enroll in the required online homebuyer education program. These courses usually cost $75–100 and can be completed in a few hours.
Step 5: Get Pre-Approved
Work with a mortgage lender experienced in HomeReady and Home Possible loans. A pre-approval will tell you how much you qualify for and strengthen your offer when house shopping.
Common Myths About HomeReady and Home Possible
Myth 1: These are only for first-time buyers.
Not true. You don’t have to be a first-time buyer, but many benefits are geared toward those who are.
Myth 2: You need perfect credit.
Wrong. A 620 score is sufficient, though higher scores yield better terms.
Myth 3: PMI lasts forever.
Unlike FHA loans, mortgage insurance here can be cancelled when you reach 20% equity.
Final Thoughts
Buying a home is one of the biggest financial decisions you’ll make, and the HomeReady and Home Possible loan programs are two of the most borrower-friendly options available today. With low down payments, reduced mortgage insurance, and flexible qualifying standards, they open the door to homeownership for families who might otherwise be priced out.
Whether you’re a first-time buyer or returning to the market, these programs are worth exploring with your lender. By comparing HomeReady vs. Home Possible, you can find the mortgage that best fits your income, lifestyle, and long-term financial goals.
