Are You Ready for HomeReady?
Are you ready for HomeReady? Mortgage giant Fannie Mae hopes you are with the introduction of this new program announced in early 2017 . This loan program has relaxed lending guidelines and allows more people to qualify for a home loan. While the loan program is designed to help first-time home buyers overcome initial obstacles when qualifying for a home loan, the HomeReady mortgage isn’t limited just to first-time homebuyers. What’s so special about the HomeReady home loan program?
About the HomeReady Loan Program
Perhaps the most popular feature is the reduced down payment. Prior to the introduction of the HomeReady loan, the minimum down payment for most conventional loans stood at 5.0%. While that might seem low for many who already own a home the fact is that the down payment requirement is the biggest obstacle first-time homebuyers face. The HomeReady loan program addresses the down payment issue and asks only for a 3.0% down payment. That’s even less than the FHA mortgage. Further, with the standard 5.0% down home loan, the monthly mortgage insurance is a bit more expensive and affects debt-to-income ratios for buyers. The HomeReady mortgage has a monthly mortgage insurance payment but the premiums are reduced, lowering the overall mortgage payment. Here are some of the highlights for the HomeReady mortgage.
Can the Down Payment be a Gift?
While the down payment is only 3.0% it can still be an issue for many potential home buyers. The HomeReady program allows the entire 3.0% to be in the form of a financial gift from a family member or a relative. Or, the down payment and closing costs can come in the form of a grant from a qualified non-profit housing agency.
The HomeReady loan accepts down payment and closing cost sources from “cash on hand.” Cash on hand is a lender term that refers to cash the borrowers own that is not in a checking or savings account but at home. Typically, such funds can’t be used unless the lender could determine the source of the funds.
How it Works
Income Sources. Borrowers will need to qualify using their income but can also use income from those who will not be occupying the property. This means a parent can help out by using the parent’s income to boost the overall income in order to qualify.
You can use household income from those that are not on the loan application. This is income from a roommate or rental income from someone renting out part of your home.
Credit Scores. The HomeReady loan program asks the minimum credit score be at least 620 but for borrowers with a credit score of at least 680 borrowers receive slightly better interest rates.
Income Limits. While not reserved for first time home buyers there are income limits set for the program and can vary based upon the location of the property. For properties located in specific low-income census tracts, there are no income limits. Properties located in other areas require borrower income cannot exceed 100% of the median income for the area.
Homebuyer Course. One final requirement is the borrowers must take and complete an online home buying counseling course.
Final Idea
These are the basic requirements you need to be aware of but there are some other things you should know about but if you or someone you know wants to buy a home with as little down as possible and still receive competitive rates, then give me a call and I’ll walk you through the program.
