What is HomeReady® by Fannie Mae?
HomeReady® is a mortgage program created in December 2015. It’s backed by the U.S. government via Fannie Mae and available via most U.S. lenders. The HomeReady® mortgage by Fannie Mae is a low down payment mortgage designed to help lenders confidently serve today’s market of creditworthy low- to moderate-income borrowers. With HomeReady®, cash for down-payment and closing costs can come from multiple sources, including gifts, grants, and Community Seconds® – with no minimum personal funds required. Via HomeReady®, households in lower-income neighborhoods and in minority-heavy areas can get easier access tolow-downpayment mortgages at today’s current rates. HomeReady® allows a downpayment of just 3 percent on a home and permits the “income pooling” for all the members of a household. This means that income from grandparents, parents, relatives, and working children can all be used to help qualify for a home loan. For many families, this can mean the difference between getting approved for a loan and getting turned down. HomeReady can also be used for a refinance, allowing up to 97 percent loan-to-value (LTV) in some cases. Give us a call today at 972-723-2611!
In order to be eligible for the HomeReady® program:
1. You must not be an owner of another residential property in the United States
2. You must agree to complete a 4-6 online homeowner counseling course
If you can meet these two criteria, you may be HomeReady™-eligible.
HomeReady Credit Score Minimums
Applicants don’t need perfect credit to qualify.
In fact, FICO scores down to 620 could be approved.
A credit score of at least 680, though, will yield the best rates. Fannie Mae waives some upward rate adjustments for borrowers with a 680+ score.
That means higher credit borrowers can receive a better rate for a 3% down loan than would 20%-down borrowers.
Be aware that lenders often impose “overlays” — tighter standards than Fannie Mae itself mandates. If your lender requires higher credit scores than those mentioned above, shop around to find a more lenient mortgage provider.
Income Limits for the HomeReady Mortgage
Income limits are set by geographical areas. In underserved areas, there are no income limits. In more economically developed areas, Fannie Mae has limited the amount of money HomeReady applicants can make. This policy ensures the program is reserved for the ones who need it most. The following is a breakdown of income limits.
- Properties in low-income census tracts: no income limit
- Properties in high-minority areas and designated disaster areas: 100% of the area’s median income
- Properties in any other area: 100% of the area’s median income
For instance, a home buyer in Dallas County finds a home within an area that limits income to 100% of the median income. The median income for Dallas County is $51,411 so that is the most the buyer can make and still buy the home.
If the borrower makes more than this, he or she could find a home in an underserved area with no income limit. Upon a successful home search, he or she could use HomeReady.
Fannie Mae has published HomeReady eligibility maps for each state that detail each geographical area. It can be difficult to see the exact boundaries. Be sure to check the property address of the home you want to buy and your income with your lender.
Cancellable Mortgage Insurance
Unlike government-insured loans, with HomeReady®, borrowers may have the option to cancel their mortgage insurance once their home equity reaches 20%. This can result in lower monthly payments down the road.
Ideal HomeReady Borrowers
- Have low to moderate income
- Are first-time or repeat homebuyers
- Have limited cash for down payment
- Have a credit score ≥ 620; borrowers with credit scores ≥ 680 may get even better pricing
- Have supplemental boarder or rental income
- Are looking to purchase or refinance