FHA vs Homepossible loan for first time home buyer

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FHA vs Homepossible loan for first time home buyer

Member since 2024 · 11 posts · 4 votes

Hello everyone, I am currently looking to purchase my first home and I am wondering which mortgage would be the best for me. I am planning to house hack it, but I want to make sure I pick the right loan before I start. Does anyone have any advice on which way to go? It also doesn't have to be an fha or homepossible loan if there's something better that I don't know about.

For reference I am in my 20s, single, make about $70k and have no debt.

Thanks!

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Patrick Roberts

Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes

In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.

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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y
In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.
1 Reply
- Beruk Lessanework
  OP
  Member since 2024 · 11 posts · 4 votes
  1y
  Quote from @Patrick Roberts:
  
  In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.
  
  That's interesting, I never thought about using a conventional loan for my first home but with a 3% down payment requirement, that's something to think about. I forgot to mention that my FICO is over 750.
  1 Reply
- Patrick Roberts
  Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
  1y
  Quote from @Beruk Lessanework:
  
  Quote from @Patrick Roberts:
  
  In most circumstances with good credit, HomeReady or HomePossible is going to crush FHA from a value standpoint. Generally, the biggest deciding factor between FHA and Conventional is credit. If your FICO is over 700 and especially over 720, Conventional is usually a better option.
  
  That's interesting, I never thought about using a conventional loan for my first home but with a 3% down payment requirement, that's something to think about. I forgot to mention that my FICO is over 750.
  
  The FHFA signed a directive today that very possibly may have killed HomeReady/HomePossible. Lenders will be getting updates on this from the GSE's over the next few days. I recommend checking in with your lender to confirm these programs are still available if you plan to use one of them.
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Stephan L Schnaiter
Lender · Greenville. SC · Member since 2018 · 25 posts · 9 votes
1y
FHA will have better rates but higher PMI, and the PMI will remain for the life of the loan.

HomePossible and HomeReady have lower PMI that can come off when you have 20% equity. If your credit scores are good, the Conventional option may be a similar payment in the short term and better cash flow in the long term.
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Deven Ziertman
Member since 2025 · 77 posts · 15 votes
1y
Both FHA and HomePossible are great options for first-time buyers, depending on your credit and goals. FHA is ideal for those with lower credit scores, offering better rates but permanent PMI unless refinanced. HomePossible is better for those with a 700+ FICO score, offering lower PMI that drops off at 20% equity, which is great for long-term cash flow, especially with house hacking. Both programs work for multi-units, but FHA might be easier for lower credit or smaller down payments. If you have good credit and are thinking long-term, HomePossible is usually the better choice.
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Eric Veronica
Lender · Cleveland, OH · Member since 2011 · 588 posts · 437 votes
1y
Homepossible is normally going to beat FHA in most scenarios. The only time we typically see FHA being a beter option is if your score is in the low - mid 600's.
Most of the time FHA interest rates and monthly PMI dont vary much whether your credit score is 650 or 800 whereas conventional rates and PMI will can swing wildly based on your credit score. If you qualify for homepossible the interest rate adjustments normally associated with conventional loans are waived so the interest rate is pretty much the same whether your credit score is 650 or 800. The monthly PMI can still vary with Homepossible to the key is comparing the monthly PMI for homepossible vs the monthly PMI for FHA. Also important to consider the fact that FHA charges an upfront mortgage insurance premium that is typically 1.75% of the loan amount.
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Brittany MinocchiBusiness Member
Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
1y
I would start by speaking with a mortgage broker - they can take your application, gather all the docs needed and see which programs you're a candidate for. In addition to everything others mentioned above, HomePossible has income limits, so it may not be an option depending on where you live. In a multiple offer situation, conventional options typically have a "leg up" over FHA offers. FHA tends to be a better options for those who have lower credit scores and/or a higher DTI.
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- Beruk Lessanework
  OP
  Member since 2024 · 11 posts · 4 votes
  1y
  Quote from @Brittany Minocchi:
  
  I would start by speaking with a mortgage broker - they can take your application, gather all the docs needed and see which programs you're a candidate for. In addition to everything others mentioned above, HomePossible has income limits, so it may not be an option depending on where you live. In a multiple offer situation, conventional options typically have a "leg up" over FHA offers. FHA tends to be a better options for those who have lower credit scores and/or a higher DTI.
  
  I'm definitely going to look into conventional options and speak with a mortgage broker. After reading everyone's comments I'm leaning more towards a conventional or home possible loan and away from fha
  0 Reply
Melvin ListBusiness Member
Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
1y
@Beruk Lessanework I would also have someone take a look at the Freddie Mac BorrowSmart Program. This program has less down and depending on credit score the mortgage insurance could be cheaper with no upfront MIP. A lot of companies will push you into an FHA loan because that is the most profitable depending on if you deal with a Broker or a Retail loan company.

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Dave Skow
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
1y
@Beruk Lessanework- use a conventional loan and avoid a FHA loan ....3% down is possible with decent pricing and mortgage insurance ...if you can put more down - pricing will improve
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- Beruk Lessanework
  OP
  Member since 2024 · 11 posts · 4 votes
  1y
  Quote from @Dave Skow:
  
  @Beruk Lessanework- use a conventional loan and avoid a FHA loan ....3% down is possible with decent pricing and mortgage insurance ...if you can put more down - pricing will improve
  
  Thanks for the response! Using a conventional loan is definitely something that I will look into. Sounds very enticing
  0 Reply
Stephanie MedellinBusiness Member
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
1y
One other difference I didn't see mentioned above - FHA loans on 3-4 units will have to pass a self sufficiency test. This means that 75% of the rental income on all units must cover the PITI payment. This is a harder requirement to meet in certain markets.
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Jesse R Wien
Lender · Arizona/Wisconsin · Member since 2022 · 17 posts · 3 votes
1y
There's a lot of factors that go into this. Credit score, number of units, condition of the property, your income, assets available for down payment off hand.
Im a lender and I am doing an FHA loan for a borrower right now that I preapproved for conventional HomeReady/Home Possible upfront. We started with conventional because his credit was decent and was looking at a fixer upper single family that would probably not pass an FHA appraisal and doing it conventional made his offer look stronger. He missed out on that one.
He called me last week about a duplex he found. You can do a duplex with 5% down home ready/home possible, but then it required more cash in reserves than he had. Numbers wise, FHA started to make more sense for this one, so that is what he did. FHA with 3.5% down. I also offered an FHA grant program (no down payment) to him, but he declined because the rate was about 1% higher and said his dad would help him with the down payment.
Moral of the story, be flexible and work with a loan officer that knows all the options and advantages/disadvantages. You need the best financing terms for you, but also want to present a strong offer to the seller and it's important to adapt to the situation. Reach out if you want to discuss in more detail!
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Ted V.
Lender · Member since 2024 · 19 posts · 8 votes
1y
Hi Beruk, Homeready or HomePossible conventional loan could be ideal — 3% down, cancellable PMI, and fewer property restrictions. FHA loans also work well for 2–4 unit properties with 3.5% down, but keep in mind FHA mortgage insurance lasts the life of the loan typically.

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Zach Wain
Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
1y
@Beruk Lessanework - Like most people said it depends on your credit score. One bonus point for FHA is you can do a FHA streamline down the road without any concern over the home value. No appraisal, no income = easiest refi ever.
Conventional loans can be hard to refi because you may not get the same home possible perks on a refi, or the value may drop and kill your refi opportunity.
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Jacob Sherman
12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes
1y
fha you'll have permanent mortgage insurance and a 1.75% funding fee for fha . homepossible is conventional with no funding fee and you'll be able to drop the mortgage insurance in the future
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