Wondering how to buy a house with a HomeReady loan? It’s easier than you think! With generous qualification guidelines and low down payment options, Fannie Mae’s HomeReady Mortgage Program has made it easy to buy a house with low income. To make things even easier, we’ve assembled all the information you need into one helpful guide!
What is Fannie Mae?
Fannie Mae is a government-sponsored enterprise (GSE) that is designed to make sure Americans have access to the credit they need to purchase homes. It’s Fannie Mae’s mission to provide stable and affordable housing options to all Americans regardless of location or income status.
What is the HomeReady Mortgage Program?
The HomeReady Mortgage Program is designed to help low and moderate income earners purchase homes. These loans are typically more affordable because they have very low down payment requirements and low credit requirements.
Why should I consider a HomeReady mortgage?
There are many benefits to using an HomeReady loan to purchase your home.
Down payments can be as low as 3 percent with an HomeReady loan! Although most conventional loans want to know that you contributed the down payment funds yourself, HomeReady loans accept down payments in the form of grants, gifts and other contributions from others. There is no minimum contribution that must come from your own savings.
Credit scores can be as low as 620 with an HomeReady loan! Applicants with a 680 or higher credit score will see additional benefits, including rate adjustments that will lower your monthly payments. Although this is higher than FHA loan requirements, this number is still far less than what traditional conventional loans require.
Home types are more varied with HomeReady loans. Many other low income home buying programs only provide funding for detached single family homes. The HomeReady program will help you finance your single family home, condominium, manufactured home or townhouse. The program also makes certain allowances for extended family households.
Mortgage insurance is required for loans above 90 percent of the home’s value. If you pay more than 10 percent down, you may not need mortgage insurance. However, this insurance is cancelled when you have reached 20% equity in your home. When it is cancelled, your monthly payments will be reduced.
Who qualifies for HomeReady loans?
To qualify for the HomeReady program, you must meet the criteria listed below. However, you do not have to be a first-time home buyer to qualify for this program!
Income must be equal to or less than 100 percent of the area median income (AMI) for your area. There are no income limits when purchasing a property in a low income designated area. You can check the income limits for your area here.
If you work in a field deemed public service (such as policing, firefighting, health care, teaching, military, etc), you can benefit from additional income allowances. The program will allow you to count overtime and part-time income to qualify for the loan.
Supplemental income can also be considered. For example, you may be able to count income from a boarder or renter. Disabled persons can also use income from a nonresident cosigner, such as a parent.
Credit requirements do apply, although nontraditional credit can be used for applicants who do not have a credit history. Your score must be 620 or higher. Higher credit scores, such as 680 and above, will yield more favorable loan terms. Your overall credit history, including payment history and balances, will also be considered during the qualification process.
Debt-to-income requirements are fairly generous with the HomeReady program. Borrowers are allowed to have a DTI of up to 50 percent with this program.
Please be aware that additional requirements may apply. This is information I found on the federal Fannie Mae website but lenders are allowed to set higher requirements if they choose to.
How do I get a HomeReady loan?
In order to get a HomeReady loan, you must take a home ownership course. This course costs $75 and can be taken online. It requires four to six hours of time, on average, and includes an online test.
You will also need to find a Fannie Mae approved lender to help you apply for your mortgage loan. Please be aware that lenders are allowed to implement stricter requirements than those set by Fannie Mae. You may need to shop around for a lender that meets your needs.