Fannie Mae HomeReady Mortgage
In the US, there are a multitude of home loan programs formulated to help buyers acquire mortgages and purchase properties. The Fannie Mae HomeReady mortgage is one of those options, offering potential benefits for future buyers. We have compiled an educational article to explain the key points relating to this mortgage product.
Fannie Mae HomeReady Mortgage
To begin, the HomeReady mortgage is defined as an enhanced affordable loan designed to meet the diverse financial and familial needs of responsible, creditworthy buyers¹.
If we expand upon this, we can identify what makes this mortgage different from others out there. Fundamentally, it targets three key areas of borrowing. With a Fannie Mae HomeReady mortgage, you will enjoy:
- A 3% deposit option on your home
- Co-borrower flexibility
- Additional income sources accepted for repayments
- Competitive pricing
- Flexible funding options
For more context, the median deposit on homes across the US is around 7%². Therefore, the Fannie Mae HomeReady mortgage can cut this by over half. Flexible funding is highly advantageous as funds for a down payment or closing costs can come from numerous sources. Fannie Mae states that this could include gifts, grants, and Community Seconds.
Eligibility Requirements for a HomeReady Mortgage
The eligibility requirements for a Fannie Mae HomeReady mortgage aren't overly strict and have been created to make this loan accessible. There are a few rules in place that stipulate the ideal borrower:
- Have an income below the AMI in your vicinity
- Be first-time or repeat homebuyers
- Have a credit score of 620 or above
- Have a supplemental border or rental income
- Be looking to purchase or refinance a home
At least one borrower is required to take homeownership education before accessing a Fannie Mae HomeReady mortgage. This is an online course that needs to be completed, and it educates the buyer on owning and taking care of a home. There is also information on mortgage repayments and managing your loan.
Fanie Mae has an Area Median Income Looking Tool³ that lets you discover the average income within your area. This tool helps buyers figure out eligibility or not by displaying the income limit a borrower must not exceed to potentially be eligible for this loan. Bear in mind that being under this limit doesn’t necessarily mean you can receive the loan as you still must meet all other eligibility requirements.
What are the Benefits of a Fannie Mae HomeReady Mortgage?
The clear benefit is that you have access to a large loan without requiring a substantial deposit. This opens the door to more buyers, giving you a better opportunity to actually afford a loan. Essentially, you can acquire real estate without needing lots of cash on hand.
Other benefits also exist, such as the availability of cancellable mortgage insurance. There are also no geographic restrictions on loan amounts, and a Day 1 Certainty freedom from reps and warrants. An immediate appraisal from lenders is also a benefit, making this one of the top mortgage products around.
When compared with other mortgage options, the Fannie Mae HomeReady is often viewed alongside Home Possible, and at times an FHA mortgage. They serve similar purposes, though there are significant benefits. The advantages listed above are unique to the HomeReady mortgage loan. We have an article dedicated to FHA mortgages, which you can find here for more information.
In conclusion, a Fannie Mae HomeReady mortgage is a financial product aimed at specific buyers. If you are looking to buy your first home, it might suit you perfectly. The low deposits are highly attractive, particularly if you are a low-income household. With added education thrown into the mix, you get a lot alongside the mortgage.
Fannie Mae Know Your Options: HomeReady Mortgage
Nerd Wallet: Median Down Payment
Fannie Mae: Area Median Income Lookup Tool