Homeownership is a part of the American Dream. Everyone wants to own one, but if you have a disability, it may be harder for you to achieve that dream. While you may be able to afford a home, finding a home that’s fit to handle your disability is a whole different topic – one which many people have trouble with.
Fannie Mae, among other loan programs, has programs that help disabled individuals. The Fannie Mae HomeReady program is one that helps disabled individuals the most. The HomeReady program has flexible guidelines that make it easier for the disabled to buy a home.
What is the HomeReady Program?
The HomeReady program has more flexible guidelines than standard Fannie Mae loans. For starters, you only need a 3% down payment. Fannie Mae also allows more co-borrowers on the loan than other loan programs allow. For example, your mom or grandparent can be a co-borrower even though they don’t live with you. With any other loan program, a non-occupying co-borrower is usually a co-signer, which has different ramifications. A co-borrower makes it easier to qualify if the person has good credit and a low debt ratio.
Who is a Good Candidate for the HomeReady Loan?
The ideal candidate for the HomeReady loan is:
- Borrowers with low income (which can pertain to disabled individuals)
- Can be a first time or repeat homebuyer
- Have little money to put down on the home
- Have decent credit (at least a 620)
- Borrowers with other income, such as rental income that they need to qualify
- Borrowers that need income pooling (use income from other household members, such as grandparents or parents)
HomeReady Income Requirements
The HomeReady income requirements are as flexible as its down payment requirements. If you live in a low-income census tract, there’s no income limit. If you live in any other area, you can make as much as 100% of the area’s median income and qualify.
As we stated above, one of the largest benefits is the flexibility in the income Fannie Mae allows including:
- Rental income
- Boarder income
- Household income from people other than the borrower
- Non-occupant co-borrowers
HomeReady Debt-to-Income Ratio Requirements
Fannie Mae typically allows a maximum debt-to-income ratio of 50% for the HomeReady program. This means that all of your monthly debts, including the following can’t take up more than 50% of your gross monthly income or the gross monthly income of all parties involved:
- Principal, interest, taxes, insurance, and mortgage insurance
- Credit card payments
- Car payments
- Student loans
- Personal loans
Fannie Mae sometimes makes exceptions for higher debt ratios as well. You just need a higher credit score to make up for it. Lenders call this a compensating factor. You make up for one ‘risky factor’ such as a high debt ratio with something less risky, such as a high credit score.
The HomeReady program does have a financial education requirement you must meet. At least one borrower must go through individual homeownership counseling. The counseling must be from a HUD-approved agency. You must undergo the counseling before you sign a contract.
The counseling can work to your benefit if you need an exception made for a higher debt-to-income ratio. Lenders may be able to accept higher ratios if you can prove completion of approved counseling.
You’ll also pay mortgage insurance on the HomeReady loan if you borrow more than 80% of the home’s purchase price. The good news is, though, that you can get the insurance eliminated once you owe less than 80% of the home’s original value. This helps you lower your mortgage payment moving forward, rather than paying mortgage insurance for the life of the loan, like FHA loans require.
The HomeReady mortgage program is great for disabled buyers. If you don’t have the down payment needed for a traditional program or you have questionable credit or a high debt ratio, the HomeReady program provides alternatives that you may not get from other loan programs. You still get the satisfaction of a stable Fannie Mae loan but without the strict requirements.Click to See the Latest Mortgage Rates»