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HomeReady Mortgage Guide - 2024

Reviewed by: David Naimey

Approved by: Chad Turner

KEY TAKEAWAYS

  • Fannie Mae’s HomeReady® program aids low-income buyers with a 3% minimum down payment.
  • HomeReady® requires a credit score of 620, offering favorable terms for those with past credit challenges.
  • The program is inclusive, available to repeat buyers and those looking to refinance.
  • Private Mortgage Insurance (PMI) costs are lower with HomeReady®.
  • Occupancy rules are flexible, providing options for various property types.
  • Borrowers must complete a homeownership course for financial education.

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Buying a home in the current property market can be challenging. The Fannie Mae HomeReady® program is geared towards buyers who might be struggling to enter the property ladder. The mortgage is designed to help people on low income buy their home and it comes with other helpful requirements including low PMI and low credit scores. 

The Fannie Mae HomeReady® program is similar to other programs offered by lenders, such as the Home Possible program offered by Freddie Mac. The main difference is that the HomeReady® program has a lower credit score requirement than the Home Possible one.

Fannie Mae HomeReady® Program Requirements

 

HomeReady® income limits

The HomeReady® loan program is focused on low-income people struggling with home purchase and sets maximum income eligibility limits. Prospective borrowers must show they earn under 80% of the area’s median income (AMI). 

For example, if your area median income is $72,000, your income limit is $57,600 (72,000×80%) to qualify for a HomeReady® mortgage. This home loan type has been designed to give a boost to people who would otherwise find it difficult to qualify for a mortgage. 

Achievable credit score

While an FHA loan typically has a required credit score of 580, the score for HomeReady® loans is 620. This is still significantly lower than the Home Possible program, which stands at 660 — a fact that helps buyers who may have had some problems in repaying past debts and managing their finances. 

The HomeReady® program will give you better terms if your credit score is higher because it improves your creditworthiness. Higher credit scores lead to better repayment terms and lower interest rates. 

Any type of buyer

The Fanny Mae HomeReady® program is not limited to the first-time home buyer. Repeat buyers and homeowners wishing to refinance their mortgage can apply for this type of loan and benefit from the favorable terms offered by the lender. 

Low down payment

The minimum down payment for a HomeReady® loan you need to meet is set at 3%. Down payments can be a significant obstacle to people wishing to buy a home, as they must set aside enough money to qualify for a loan. A 3% down payment makes homeownership achievable and is particularly helpful for people on low incomes. 

The higher the down payment, the lower the monthly payment on your mortgage will be. If you can afford a larger down payment, it makes sense to lower the amount of money you borrow and have more affordable monthly mortgage payments. 

Low Private Mortgage Insurance rates (PMI)

HomeReady® home loans come with certain mortgage insurance requirements. A Private Mortgage Insurance (PMI) must be paid whenever the down payment on a loan is less than 20%. 

Private mortgage insurance costs vary, but with Fanny Mae HomeReady®, borrowers can reach a PMI rate on the lower end of the range. A lower mortgage insurance means that your monthly payments will be more affordable and more manageable.  

Different types of properties available for purchase with a HomeReady® mortgage

The HomeReady® mortgage program can be used to buy a single-family home, a condominium, or a home in a planned unit development. 

Whatever the type of property you choose, it must be your primary residence. You can’t rent it out but if you purchase multiple units in a development, you can stay in one and rent the others. 

Occupancy criteria

The HomeReady® program is flexible with occupancy criteria. At least one of the persons applying for the mortgage must occupy the home at closing — but not all are required to do so. 

This requirement helps borrowers have a co-signer on their mortgage, especially if the co-signer has a good credit score. Borrowers then benefit from the higher credit score, which leads to lower interest rates, while the co-signer is not required to reside in the home. 

Homeownership education courses

To make sure that borrowers know how to be responsible with their finances, Fanny Mae requires borrowers to complete a homeownership course that helps them understand their finances, income, expenses, and obligations. Such courses are helpful because they give borrowers a good starting point on how to be sensible with their expenses and mortgage payments. They offer financial education and a personal finance guide that benefits borrowers in the long term.

Trust Society Mortgage for Your HomeReady® Program

If you want to buy a home but don’t have a high income, the HomeReady® home loans from Fanny Mae are a great starting point. Low interest rates and low credit score requirements make homeownership more accessible. HomeReady® helps people on low incomes buy their homes on more favorable terms. 

Contact a mortgage loan officer to check your eligibility, learn more about HomeReady® loans, and for information on FHA loans and other types of loans and mortgage products that support low or moderate-income borrowers.

Frequently Asked Questions

Qualifying for the HomeReady® program typically requires a minimum credit score of 620. In addition, the borrower’s income must be at or below 80% of the area median household income for the property’s location. Also, the property must be a primary residence.

Benefits include low down payments (as low as 3%), reduced private mortgage insurance (PMI) costs, and the potential to combine it with other Fannie Mae programs for more benefits. It also allows non-traditional sources of income, like income from boarders or rental units, to count towards mortgage qualification.

Yes, the HomeReady® program is available for refinancing. This can be a good option for homeowners who have mortgages with higher interest rates and wish to lower them.

Eligible properties include most types of home, such as single-family homes, townhouses, condos, and co-ops. The property must be the borrower’s primary residence.

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