Which is better for you? The HomeAdvantage loan or the FHA loan? Here is a quick and easy comparison.
Good to know: You do not need to be a first-time home buyer to qualify for either of these programs. As long as you will occupy the house as your primary residence for at least one year, you can use either HomeAdvantage or FHA.
HomeAdvantage
- Has an income limit to qualify. In WA, it is $97,000 household income. In CA, it varies by county.
- Provides the cash for you to use as a down payment. (The down payment will be either 3% or 3.5%.)
- The down payment is not a gift. It is an interest-free loan that you pay back when you pay off your mortgage — whether it’s by selling the house, refinancing, or paying it off in 30 years.
- To receive the down payment from HomeAdvantage, you must use a HomeAdvantage mortgage. This mortgage will have a higher interest rate by about .25%. So yes, you get an interest free down payment, but you pay a little more for the mortgage.
- The way to get a HomeAdvantage program is through a loan officer who has taken the training class and is authorized by the state to do the loan. (Such as myself. I am licensed in WA and CA. In CA, the program is CADAP and is similar to HomeAdvantage.)
- Attending a home buyer education seminar is required. Your loan officer will direct you to an available class. In WA, the class is free. In CA, there is a nominal fee.
FHA (Federal Housing Administraion) Loan
- No income limit.
- Down payment is 3.5%. It can come from your own funds, a gift from family, or an acceptable down payment assistance program.
- An Upfront Mortgage Insurance Premium (UPMIP) is required. It is 1.75% of the loan amount. Most people roll it into the loan, making the mortgage slightly higher. Because it is amortized over 30 years, it increases your monthly payment by only a small amount.
- You might have a smaller monthly payment with the FHA loan, depending on credit score and what you qualify for.
- No education class required.
- Because you provided the down payment, you do not have anything to pay back when you sell the house or pay off the mortgage.
HomeAdvantage (and CADAP) is a great program if you can’t save money for a down payment as fast as home prices are rising. The FHA loan is a great program if you can provide your own down payment but don’t qualify for the conventional loan.
Thank you for stopping by my blog. If you are in WA or CA, I am happy to provide you with a free analysis and cost estimate worksheet for the best loan you qualify for. That might not be either HomeAdvantage or FHA. As a full-service mortgage loan officer, I have an entire “smorgasbord” of loan programs to choose from.
