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Exchange a 20% Down Payment for Just 3.5%

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Marlene Sheard

If you are saving for a down payment to buy a home, you may be able to drop your savings goal from 20% to just 3.5%. With just a little over 3% down payment, you may be eligible for two great loan options that, unlike many other low and no down payment loans, do not come with an abundance of caveats such as restrictions on where you can purchase or that require you to be a first-time homebuyer. For buyers needing flexible guidelines and low-down payment options, consider an FHA (Federal Housing Administration) loan or the Fannie Mae HomeReady loan.

Comparison of an FHA loan and HomeReady loan:

  • Both loans are not limited to first-time homebuyers.

While an FHA loan and HomeReady loan are available to first-time homebuyers, you do not have to be a first-time homebuyer to qualify for these loans. However, they may require you to participate in a homeownership educational course. 

  • Both loans offer low down payment requirements.

An FHA loan requires a 3.5% down payment and the HomeReady loan requires only a 3% down payment. Both loans allow part or all of the down payment to be a gift from a family member when purchasing a primary single residence.

  • Both loans require extra fees added to the mortgage.

An FHA loan requires an upfront fee and a monthly FHA mortgage insurance premium (MIP) to be added to the mortgage. The FHA MIP remains on the loan for the life of the loan. The HomeReady loan requires monthly premium mortgage insurance (PMI) to be added to the loan. Unlike FHA MIP, the PMI on a HomeReady loan can be removed once the loan-to-value ratio reaches 78% and if the homeowner is current on their mortgage payments.

  • Both loans have generous loan limits.  

Both the FHA and the HomeReady loan received increases to their loan limits for 2020. An FHA loan will allow you to borrow up to $331,760 for most areas of the country, while a HomeReady loan will allow you to borrow up to $510,400.

  • Both loans are available for borrowers with lower credit scores.

Borrowers with credit scores at 620 or above may be eligible for both an FHA loan or HomeReady loan. FHA loans provide financing options for borrowers with credit scores between 580 and 619 but may also require additional qualifying restrictions.

  • Income limits may apply on a HomeReady loan.

FHA loans do not have any maximum income restrictions, whereas the HomeReady loan does. Borrowers using a HomeReady loan may be subject to income restrictions depending on the location of the property.

To see if an FHA loan or HomeReady loan is right for you, contact your local Ameris Bank mortgage banker.


Marlene Sheard is a mortgage marketing representative for Ameris Bank and previous sales and marketing president for her local Home Builders Association. She enjoys sharing her experiences for the buying, selling, and financing of homes.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All loans subject to credit approval.