Help Borrowers Make an Informed Choice
February 12, 2015
To help your borrowers make an informed choice, it’s important you understand how an FHA mortgage compares with Home Possible AdvantageSM.
Home Possible Advantage is an affordable, conventional mortgage with a 3 percent down payment designed to make responsible homeownership accessible to qualified first-time buyers, and qualified low- and moderate-income borrowers. It’s a great product for community lenders like you who know your customers and can confidently recommend the right low down payment option to the right borrower.
An FHA mortgage can also be a good option for a first-time borrower. However, an FHA mortgage has a different mortgage insurance (MI) structure than a conventional mortgage like Home Possible Advantage. The difference between the two can impact the upfront cash required, as well as the monthly payment. It’s important to understand these differences so you can recommend the best option for your borrowers.
The following questions will help as you counsel borrowers:
Does your borrower have a down payment of 3 percent?
Borrowers with a 3 percent down payment can consider either the Home Possible Advantage mortgage or an FHA mortgage.
Does your borrower have a FICO score lower than 680?
While your borrower may qualify for Home Possible Advantage, an FHA loan may be a better choice.
Is your borrower most interested in a low down payment?
Since Home Possible Advantage doesn’t have an upfront MI payment, the down payment is generally lower than an FHA loan.
Is your borrower most interested in the lowest monthly payment?
Although the monthly payment for a Home Possible Advantage mortgage is competitive with FHA, the total monthly payment for an FHA mortgage may be slightly lower. This may vary over time as MI rates change.
Does your borrower have a FICO score of 680 or higher?
Home Possible Advantage may be a good option since it provides:
- No upfront MI premium, which means less cash required upfront. FHA requires an upfront MI premium of 1.75 percent.
- Ability to cancel MI per Single-Family Seller/Servicer Guide requirements. FHA monthly MI is required for the life of the loan.
- Risk-based MI premiums, so the higher the FICO score, the lower the premium. (Check with your MI partners for specific requirements.)
- Opportunity to build home equity more quickly since there’s no upfront MI premium to finance and increase the mortgage amount.
- Lower monthly MI payments.
Your expertise on these loan products can help your borrowers meet their goals, save them money, and help ensure successful long-term homeownership.