TK Team No Comments

HomeReady Mortgage: Affordability and Flexibility for First-Time Homebuyers

The HomeReady mortgage is a program from Fannie Mae that allows borrowers to put down as little as 3% on a home purchase. This is even lower than the 3.5% down payment requirement for an FHA loan. In it’s design, it helps low-income buyers by placing a limit on how much you can make to qualify, and HomeReady loans allow borrowers to use gifts, grants, or a down payment loan to help cover their upfront costs. co-borrowers are also acceptable, whether they live in the home or not, which makes HomeReady one of the easiest mortgage programs to qualify for.

Some basic requirements to consider:

  1. You cannot earn more than 80% of your Census tract’s median income
  2. You need a FICO score of at least 620 in most cases
  3. The home must be your primary residence
  4. You should have a debt to income ratio (DTI) that’s no higher than 50%. This is more lenient than most other mortgage programs
  5. You must agree to complete a 4-6 hour online homeownership education course

Let’s dig a little deeper below.👇

HomeReady Income limits 2023 💰

Fannie Mae sets the HomeReady income limits nationwide. To qualify, you can’t make more than 80% of your area’s median income (AMI). That means if your area has a median yearly income of $100,000, you must make $80,000 or less to qualify for the HomeReady program. A great tool for anyone to look up income limits for 2023 is Fannie Mae’s AMI Lookup Tool. Simply input your address, and the tool will give you details to your county’s area median income.

Let’s talk Credit 💳

HomeReady depends on the borrower’s credit, and you’d typically need a score of at least 620 to qualify and if your interested in a multi-unit property a 680+ might be needed. Another option to consider if your credit is low is an FHA loan where with a FICO as low as 580, you could potentially borrow with a 3.5% down. Or if you are closer to the 500-579 range you might still qualify, but they’d need a least 10% down payment.

Eligible property types 🏡

You can purchase a traditional single-family home if you want. But, if you want something a little different, Fannie Mae also allows the purchase of:

  • Condominium units
  • Homes in a planned unit development (PUD)
  • Co-ops
  • Manufactured homes
  • Multi-family homes with 2, 3, or 4 units – will require a higher credit score, possibly as high as 680+

Keep in mind different property types have different requirements for documentation and property condition. The specific requirements will vary depending on the lender and the property type so make sure to connect with your lender so they can help you determine the specific requirements for the property type you are interested in. No matter what type of home you buy with HomeReady, it must be your primary residence. This means that if the building has 2-4 units, you must live in one of the units yourself full-time. You cannot use this loan program to purchase investment properties or vacation homes.

Debt to Income Ratio 🔎

What lenders are comparing is your total income to your total monthly debts. for HomeReady is a little more forgiving with it allowing no higher that 50%. To calculate your debt to income ratio

  1. Add up your monthly bills which may include: Monthly rent or house payment, credit cards, car payments, student loans – do not include your bills, like phone, electric, gas ect..
  2. Divide the total by your gross monthly income, which is your income before taxes.
  3. The result is your DTI or debt to income ratio, which will be in the form of a percentage. The lower the DTI, the less risky you are to lenders

Online Home Education Course 📖

HomeReady mortgage borrowers are required to take a homeownership education course.

The course must be taken with a HUD-approved housing counseling agency. The homeownership education course teaches borrowers about the responsibilities of homeownership, such as budgeting, home maintenance, and credit. It also helps borrowers understand the mortgage process and how to avoid foreclosure.

If you would like to learn more about the HomeReady mortgage, you can visit the Fannie Mae website or speak with a mortgage professional like myself to explore your options.

To get started click on Apply Now.