Updated as of January 2017
The HomeReady™ mortgage program by Fannie Mae is designed to be their answer for an affordable lending product and is coming back to the mortgage market looking to provide more access to credit for creditworthy borrowers.
The underwriting guidelines for the HomeReady™ program are flexible and targeting low- to moderate income borrowers and buyers in designated low-income, minority, and disaster-impacted communities.
HomeReady™ Mortgage Highlights
- HomeReady™ mortgages are now standard and should be available to all Fannie Mae lenders. No special approvals are required.
- General income limit of 80% of area median income. Eligibility is also provided for properties located in low-income census tracts with no borrower income limits, and up to 100% of AMI for properties located in high minority census tracts or designated disaster areas. The requirement that at least one borrower must be a first-time home buyer has been removed for one-unit principal residence loans with LTV ratios greater than 95% up to 97% that are underwritten through Desktop Underwriter (DU®).
- Non-borrower household income from a family member is permitted as a compensating factor to support a higher debt-to-income (DTI) ratio in DU. The lender must obtain a written statement from the non-borrower that he or she intends to reside with the borrower in the subject property or can use the HomeReady™ Non-Borrower Household Income Worksheet and Certification (Form 1019) that has been developed to assist lenders in capturing the non-borrower household income requirements.
o Non-occupant borrowers are permitted for qualifying purposes.
o Boarder income guidelines have been updated to provide documentation flexibility.
o Rental income from an accessory unit may be considered in qualifying the borrower.
- DU – DU messaging will identify when the loan may be eligible as a HomeReady™ mortgage based on an assessment of qualifying income against the applicable income limits.
- Manufactured housing – One-unit manufactured housing properties will be permitted as an eligible property type for principal residence transactions. The maximum LTV, CLTV, and HCLTV ratios for manufactured housing apply. Other requirements specific to manufactured housing continue to apply, such as the requirement for DU.
- HomeStyle® Renovation – HomeStyle Renovation mortgages will be permitted for principal residence transactions. The maximum LTV, CLTV, and HCLTV ratios for HomeStyle Renovation apply. Other requirements specific to HomeStyle Renovation continue to apply, such as lender approval.
- Two- to-four unit properties – the maximum LTV, CLTV, and HCLTV ratios for loans secured by two- to-four unit properties has been reduced to align with standard eligibility (no longer at 95%).
- Homeownership education – This is required for at least one borrower for both purchase and limited cash-out refinance transactions. (See Homeownership Education and Housing Counseling below for more information).
- Buydowns – Both 2-1 and 3-2-1 buydown structures are permitted.
- Pricing – Fannie Mae is simplifying the way HomeReady™ loans will be delivered by eliminating the need for separate delivery contracts or whole loan commitments. For MBS loans, lenders will deliver HomeReady™ at their standard base guaranty fee into standard contracts; for whole loans, lenders will commit and deliver HomeReady™ loans into standard whole loan commitments. Standard risk-based loan-level price adjustments (LLPAs), as shown in the LLPA Matrix, will be waived for any HomeReady™ loan with an LTV ratio greater than 80% and a representative credit score equal to or greater than 680. For all other HomeReady loans, the LLPAs will be capped at 1.50%.
- Mortgage insurance – Standard mortgage insurance is required on loans with LTV ratios at or below 90%, and 25% coverage is required for loans with LTV ratios above 90% to 97%. The Minimum Mortgage Insurance Coverage Option may be used with HomeReady™ loans, but the waiver or cap of LLPAs does not apply to the LLPA for that option.
- In an effort to further simplify Fannie Mae’s affordable lending product for lenders and borrowers alike, Fannie Mae has retired the Community Solutions™ and Community HomeChoice™ MCM features, which generally required manual underwriting.
HomeReady™ Mortgage Frequently Asked Questions
Just a few of the HomeReady™ mortgage questions that people have include:
Q: What is the difference between a HomeReady™ Loan and a conventional loan?
A: A HomeReady™ loan is made to help people finance their homes who may have low-income or live in minority or disaster impacted areas. There many alterations to this loan that make it more affordable for the borrower.
Q: How much is the downpayment on a HomeReady™ loan?
A: The down payment of HomeReady™ loans can be very low. With a HomeReady™ you can finance up to 97% percent of your home. This depend on the lender, so make sure to shop around.
Q: What are the qualifications for a HomeReady™ loan?
A: This loan was created for low income families and individuals. The borrower must complete an online training course of homeownership and receive the certificate of completion. The borrower must be a first time home buyer. The property must be on the list of eligible homes for a HomeReady™ loan program. Finally the borrower must live on the property as a primary residence.
Q: How much does the training course of homeownership cost?
A: This training course is a required part of the loan program that is at no extra cost to you.
Q: Can I use a grant to pay for my down payment?
A: Yes! This loan allows for grant, monetary gifts and public funds to be used in not only the down payment but on the closing costs as well!