If you’re in the process of buying a home, you may be deciding between Home Possible® and HomeReady® loans. These loans are offered by Freddie Mac and Fannie Mae respectively, the two major companies that buy and sell mortgages, giving borrowers options outside the plethora of government-backed agencies.

Home Possible loans are good for low- to medium-income borrowers who can afford a 3% down payment, whereas HomeReady loans are geared towards low-income borrowers who can’t afford a large down payment. Ultimately, both allow for a low down payment but differ in a few key ways.

Keeping these two loan types straight can be difficult, which is why

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has put together the following guide detailing everything you need to know about Home Possible vs HomeReady mortgages.

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Home Possible vs HomeReady loans—what’s the difference?

While it’s true that Home Possible and HomeReady loans have many similarities, they are not entirely alike. Let’s take a look at their differences.

Home Possible

Offered by Freddie Mac, the Home Possible loan is ideal for those homebuyers with a credit score of 660 or higher who can contribute at least 3% of the total mortgage to the down payment.

No matter whether you’re buying a single- or multi-family unit, the Home Possible loan allows borrowers to source the funds for your down payment from multiple sources, thereby helping more people to qualify.

HomeReady

Much like the Home Possible loan, Fannie Mae’s HomeReady loan is a great option for those without a large down payment saved up, only requiring the borrower to contribute 3% of the home’s total cost.

The money for the down payment can come from grants, gifts, and the like, unless you are purchasing a multi-family unit—in which case you’ll need to pay the 3% entirely yourself.

The HomeReady loan also differs from its counterpart in that the credit score requirement is lower and therefore easier to meet, making it usually more accessible than Home Possible.

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Who are Home Possible loans geared towards?

Generally speaking, Freddie Mac’s Home Possible loan is geared towards homebuyers with a low-to-moderate yearly income who have at least 3% of the mortgage saved for a down payment. You’ll be required to pay

private mortgage insurance

(PMI) until your loan-to-value ratio reaches 80%, after which point it may be canceled.

The Home Possible loan is also good for those who:

Have no credit score due to a lack of credit history (in which case a 5% down payment is required)

Are first-time or repeat homebuyers

Need flexibility when it comes to eligible down payment sources. The Home Possible loan allows funds for the down payment to come from grants, gifts, and the Affordable Seconds program

How to qualify for a Home Possible loan

To qualify for a Home Possible loan, you must meet the following requirements:

Have an annual income of less than or equal to 80% of the area’s median income

Have a credit score of 660 or higher

Complete a homebuyers education course (if all borrowers are first-time buyers or if none of the buyers have a credit score)

Who are HomeReady loans geared towards?

If you don’t have a very large down payment saved up, the HomeReady loan is a good choice for you—you’ll still have to pay private mortgage insurance (PMI) until your LTV reaches 80%, but it’s a good deal overall.

Ultimately, the HomeReady loan works well for anyone who meets one or more of the following descriptors:

You have additional income from a renter or tenant

You have at least 3% of the total mortgage saved for a down payment

You’re a repeat or first-time buyer

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How to qualify for a HomeReady loan

As long as you meet the requirements listed below, you’ll qualify for a HomeReady loan:

Your annual income is less than or equal to 80% of the area’s median income

You have a credit score of 620 or higher

Complete Fannie Mae’s Framework homeownership education program

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How do Home Possible vs HomeReady loans compare?

Now that we’ve explored the finer details of Home Possible and HomeReady loans, let’s look to the table below to see how they compare:

Requirement	Home Possible	HomeReady
Minimum credit score	660	620
Minimum down payment	3%	3%
Income limitations?	Yes, income must be ≤ 80% of the area’s median income	Yes, income must be ≤ 80% of the area’s median income
Mortgage insurance required?	Yes, until 80% LTV ratio is met	Yes, until 80% LTV ratio is met
Homebuyer education requirement?	Yes	Yes
First-time homebuyer requirement?	No	No
Allow boarder/renter income	Yes	Yes

As you can see, the two loan types are very similar, with the main difference being the credit score requirement.

MORE: How to remove PMI from your mortgage

Which should you get?

Both the Home Possible and HomeReady loans allow borrowers the benefit of a low down payment mortgage without having to sacrifice the benefits of a conventional loan. This is great for prospective homebuyers, but it can make choosing between the two difficult.

Ultimately, your credit score will be the deciding factor for which loan you should get. If your credit score is between 620 and 659, you’ll have to settle for the HomeReady loan, whereas a credit score of 660 or higher will allow you to qualify for the Home Possible loan.

Of course, there are a few other low down payment loans available to you as well, such as:

U.S. Department of Agriculture (USDA) loans

Federal Housing Administration (FHA) loans

U.S. Department of Veterans Affairs (VA) loans

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Mortgage insurance vs. homeowners insurance: what you need to know

Do I need home insurance with a Home Possible or HomeReady mortgage?

Regardless of whether you purchase a Home Possible, HomeReady, or even a government-backed loan, the lender will generally require you to buy homeowners insurance before you can close on the loan. This helps ensure that their investment is protected should your home be damaged or destroyed before the loan can be paid off.

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