The Fannie Mae HomeReady mortgage program provides an incredible opportunity to buy a home, or refinance an existing mortgage. This program offers flexible requirement guidelines, competitive loan terms, and a low down payment option.
Fannie Mae HomeReady Highlights
This unique program offers many advantages. You can view some of the highlights of HomeReady below:
- 3% down payment – You can finance up to 97% of your home purchase (97% LTV). You can also borrower the money used for your down payment, it does not have to come from your own funds.
- Affordable and cancellable mortgage insurance – The mortgage insurance on HomeReady is cheaper than other types of mortgages, including other conventional loans. You also may cancel your mortgage insurance once you have at least 20% equity (an 80% LTV or lower).
- Lower interest rates – The interest rates on HomeReady are lower than other types of mortgage loans, including conventional and government-insurance mortgages, such as FHA loans.
- Flexible income requirements – There is a great deal of flexibility in what income can be used to qualify for your mortgage. As mentioned above, you can use the income from all members in your household, whether they are on the loan or not. You can also use “boarder income”, which is income collected from renting out a room or portion of your house, such as a basement, or “mother-in-law” unit, which are also known as accessory dwelling units (ADU). Also, you can have a non-occupant co-borrower, which in other words, means you can have a cosigner that does not live at the residence you purchase.
HomeReady Program Guidelines
Below are some of the requirements you must satisfy in order to be eligible for the HomeReady program:
- Credit score – The minimum credit score requirement is 620. Some lenders may require a higher score, but that seems to be the lowest FICO score that is being accepted.
- Not a current homeowner – You must not currently own any other property. You do NOT have to be a first time home buyer, but you can not currently be a homeowner.
- Homeowner class – You must complete a homeowner education course. This is known as the Framework homebuyer education course. Only one borrower needs to participate, and it can be done online, and at your own pace.
- Down Payment – The minimum down payment requirement is 3%. This money can be borrowed, gifted, or even come from a down payment assistance program. You do not have to use your own funds (“cash on hand” or from a bank account that you own), as is often required with other types of mortgages.
- Income Requirements – As mentioned above, there is a lot of flexibility in what income can be used to qualify. The maximum DTI ratio (debt-to-income ratio) is 50%. Fortunately, you can use the income from all members in your household to qualify, whether they are related or not. Also, they do not have to be on the loan, so anyone living in the house can use their income to help you qualify.
- Income Limits – There are also income limits restricting the amount of money you can make. There are not any income limits in many regions, such as areas with lower income, high minority areas, and designated disaster areas. In more affluent cities, the income limits are 100% of the average median income of that location. You can look up the income limits by searching an address on the Fannie Mae website.
List of HomeReady Mortgage Lenders
You must work with a Fannie Mae approved lender. Below is a list of some of the best mortgage lenders that offer the HomeReady program:
2.) Union Bank
8.) Third Federal
10.) Omega Mortgage Group
The above lenders are our top picks for the HomeReady program. If you would like some help finding the best HomeReady lender for your home loan, fill out this form requesting to be matched with a lender.
Frequently Asked Questions
Can I get this loan through any mortgage lender?
Any mortgage lender that is Fannie Mae approved is usually eligible to issue this type of loan. If you would like some helping finding an excellent HomeReady mortgage lender, we can help match you with one in your location.
Can you refinance a property with HomeReady?
Yes, you may use the HomeReady program to refinance an existing mortgage. This includes a limited cash out refinance option with a 97% max LTV ratio.
What types of properties are eligible?
The HomeReady program is available for almost any type of residential property, including single family residences, a multi-unit property (2-4 units), condominiums, co-ops, and manufactured homes.
Are seller concessions allowed?
Yes, seller concessions are allowed. The seller can pay your closing costs, and even provide the funds to use for your down payment.
Can you use HomeReady to purchase an investment property?
No, you may not purchase an investment property, vacation home, or second home using this program. It is only available to purchase a primary residence that you will occupy.
Is HomeReady the same as the Fannie Mae Conventional 97 Loan?
No, these are two separate Fannie Mae programs. Both only require a 3% down payment, so they are often confused as being the same. HomeReady is geared for low-to-moderate income households, whereas the conventional 97 loan is geared for borrowers with good credit and income.
Do my co-habitants living in my home have to be legal residents?
No, your co-habitants (people living in your home) do not have to be legal residents. They can be undocumented immigrants, and you can still use their income to help you qualify.
How does HomeReady compare to the Freddie Mac Home Possible program?
HomeReady and Home Possible are both very similar, providing a low down payment mortgage that is easy to qualify for. Determining which is better will depend on your unique situation. One advantage of the Freddie Mac Home Possible program has over the HomeReady program is that if you buy a 2-4 unit property with HomeReady, you will have to source the funds for your down payment (meaning it can not be borrowed or gifted).
How does the HomeReady compare to FHA loans?
There are some clear advantages of the HomeReady program compared to FHA loans. This includes easier qualification guidelines, lower interest rates, and the option to cancel your mortgage insurance once the LTV is below 80%. FHA loans require that you pay mortgage insurance no matter what the LTV is, making them more costly over time. We recommend that you first see if you qualify for HomeReady, and if are not approved, then apply for an FHA loan.