HomeReady Mortgage Loan

The HomeReady mortgage program aims to expand homeownership to more low- and moderate-income families. Fannie Mae HomeReady loans are available all across the country to creditworthy homebuyers. Along with lower minimum down payment requirements, qualifying applicants also receive many other benefits to help them secure a loan. Advantages like reduced mortgage insurance requirements for qualifying loans make monthly payments more manageable.

In addition, HomeReady income limits are only applied to certain properties, allowing applicants to explore options anywhere in the country. Unlike with other Fannie Mae loans, borrowers for a HomeReady mortgage can also use supplemental income, grants and gifts from friends and family to fulfill loan requirements. Overall, this program offers plenty of flexibility to homebuyers who qualify. Learn more about the requirements to become home-ready below.

What is a HomeReady Mortgage Loan?

Fannie Mae Home Ready is a mortgage program that seeks to expand and promote sustainable homeownership. To do this, the program offers loans to creditworthy homebuyers with low to moderate incomes. Qualifying applicants gain access to especially low down payment requirements and financing of up to 97 percent on properties across the country. Unlike similar government-backed programs and conventional loans, this type of loan has fewer restrictions on aspects such as:

  • Supplemental income considerations
  • Down payment contributions
  • Mortgage insurance
  • Loan amounts due to property location

Furthermore, HomeReady loans are not limited to first-time homebuyers. These loans are available to new homebuyers, repeat buyers and even to homeowners in need of low-cost refinancing. As with other mortgage programs, applicants must fulfill certain qualifications and requirements first. Because this program aims to expand homeownership opportunities, eligibility is fairly simple to determine.

HomeReady Eligibility

In contrast to many other mortgage options, this program only involves a few eligibility requirements. For example, HomeReady income limits depend largely on the location of the property you want. You must also plan to use the property as your primary residence. As such, these loans are not available for second homes or investment properties. As with all Fannie Mae mortgages, you must meet a minimum credit score and fit within a certain debt-to-income (DTI) threshold.

The HomeReady income eligibility lookup tool can help you understand the location requirements of the program. While you are not restricted to properties within certain neighborhoods, some areas involve an income limit. Depending on the property you choose, you may need to meet this income qualification to get a loan.

Download our helpful guide to learn more about how location affects the eligibility requirements and how to use the lookup tool.

HomeReady Program Requirements

Once you are deemed eligible for a HomeReady loan, you must complete certain requirements to officially secure the mortgage. As with every mortgage program, this involves finding the right property and making a down payment. First, you must choose a home that fits your income, if it is located in an area with an income limit. Then, to receive financing, you must make at least a 3 percent down payment on the property. This even beats out FHA loans, which require a 3.5 percent down payment at best.

HomeReady guidelines also require that you complete a homeownership education course. This requirement must be met by closing or you cannot receive the loan. You can also opt to receive homebuyer housing counseling instead, as long as it is completed before you enter a contract. Homeownership education and counseling are beneficial for both you and the lender, as it helps prepare you for the home-buying process.

HomeReady Guidelines for Homeownership Education

In order to get a HomeReady mortgage, you need to complete the mandatory homeownership education course. This course involves a moderate fee, and there are two ways to enroll:

  • The program offers a specific online course for completion of the education requirements. This homebuyer course covers everything you need to know about the home-buying experience, calculating your budget and navigating the closing process.
  • In person. If you are unable to enroll in the online course, you may be able to complete the requirement in person. Simply inform the lender of your limited internet access or other eligible reason for further instruction.

Some down payment assistance programs have their own education requirements. In that case, you can complete the HomeReady program requirement through the assistance program. If you have already completed housing counseling prior to your application, you can waive the education requirement entirely. To do so, you must submit the necessary form signed by your counselor.

Advantages of the Fannie Mae HomeReady Program

HomeReady guidelines are much more flexible than those of many other mortgage programs. This gives applicants more opportunities to secure and maintain an affordable mortgage. For example, loans above a certain percentage are eligible for reduced mortgage insurance. In addition, once borrowers reach a certain milestone in their mortgage payments, it is possible to cancel the insurance altogether. That way, homeowners are able to cut this cost and pay off their mortgages faster.

Unlike other Fannie Mae loans, this program also allows applicants to include additional funds in their income report. Supplemental income from boarders and tenants may be considered in the application, as long as there is proper documentation. There is also no down payment minimum regarding personal contributions. As a result, applicants can use as many grants and gifts as needed to meet the down payment requirement.

Tips to Prepare for a HomeReady Mortgage Loan

The process to get any type of loan can be long and complicated. Fortunately, Fannie Mae HomeReady loans only have a few requirements you need to fulfill in order to complete the process. In order to make your home buying experience go even smoother, here are a few tips to keep in mind:

  1. Use a mortgage calculator to determine how much mortgage you can afford in advance.
  2. Examine your finances such as your credit score and DTI ratio to make sure you are ready to meet the loan requirements.
  3. Find a lender that is eligible to grant HomeReady mortgages and take the time to get pre-qualified in order to avoid common home-buying mistakes.
  4. Start looking for a home. Make sure to find one in your price range based on the terms of your prequalification. It is also a good idea to have the property inspected before closing, to ensure that there are no unfortunate surprises later on.
  5. Complete the education requirement early. Consider homeownership counseling through a HUD-approved agency or enroll in an education course as early as you can to get this requirement out of the way.

With the help of these tips, you can become a homeowner in no time.

Note: For more insight into HomeReady mortgage loans and the process to apply, you can download our comprehensive guide.

What is Fannie Mae?

The Federal National Mortgage Association (Fannie Mae) provides affordable housing finance options for homebuyers and renters. Fannie Mae does not provide original mortgages. Rather, the organization purchases existing mortgages and guarantees them with government sponsorship. Fannie Mae mortgages have a fixed rate and can have a lifespan as long as 30 years.

Who is eligible for Fannie Mae?

Fannie Mae guarantees multi-family and single-family mortgages and loans. To qualify for either type of loan, an applicant must have an income lower than the local average, and the property he or she wants to buy must be worth less than the federal maximum. Further, applicants must have a credit score above 620. However, the minimum required credit score may change depending on how many properties the applicant plans to purchase.