The HomeReady™ mortgage program was created by Fannie Mae and was designed to help home buyers with limited resources afford mortgages. The HomeReady™ mortgage program replaced the commonly known “My Community Mortgage” Program and was designed to cater to households who have untraditional living arrangements with extended family members. Such as, parents who live with their grown children, or aunts, uncles and cousins all living together that wish to buy a new home.
The HomeReady™ program offers people a chance at owning a home and only requires 3.0% of the property purchase price to be put down. This specific program allows the family to include all income from the household rather than just the borrower and co-borrower’s income. This not only improves the ability for the borrower to qualify for a mortgage but also increases the mortgage price. Meaning, by combining everyone’s income who lives in the house together, the borrower can be qualified for a bigger mortgage loan amount. The HomeReady™ program also has more flexible qualification requirements. The minimum credit score needed to qualify for the HomeReady™ program is only 620, and depending on your situation under certain circumstances, the program will allow someone with a lower credit score to qualify if their debt-to-income ratio is better than 50%. Keep in mind, though, the lower your credit score the higher your down payment rate will be.
HomeReady™ Mortgage Program Pros
- Allows a borrower to buy a new home with a low down payment and doesn’t require borrower contribution
- Allows a borrower to include income from other non-occupant borrowers (not living in the home, but will be included on the loan -such as a parent or guardian) and non-borrower household members (living in the home but not included on the loan- like relatives) which allows the borrower to qualify for a bigger mortgage.
- There is no mortgage insurance premium or private mortgage insurance cost due up-front.
- This program offers more flexible mortgage qualification requirements.
HomeReady™ Mortgage Program Cons
- The HomeReady™ program usually has a higher interest rate than other mortgage programs that advertising no or low down payments.
- Depending on the property’s location the borrower could be subject to maximum income limits.
- The HomeReady™ program does require that the borrower pay Private Mortgage Insurance on a monthly basis.
- There are limits on the mortgage amount based on what you qualify for.
It’s important to know the good and bad to the HomeReady™ mortgage program, so you have a better understanding of the program. Every mortgage program on the market has some cons, luckily the HomeReady™ mortgage program is one program that has more pros than it does cons, making this the mortgage program a popular choice for larger families who couldn’t qualify for other mortgage programs with just the borrower’s income.
Usually, when you apply for any other mortgage program, only the borrower’s income is considered for qualifying, but with the HomeReady™ mortgage program you can add up to three additional sources of income. Which gives the borrower a better chance at qualifying. You can include income from another borrower who is going to be included on the loan with the borrower but doesn’t live in the home. This is usually a parent or other relative who will sign as a co-borrower but won’t reside in the home. You can include income from someone who lives in the house but doesn’t want to be put on the loan as a co-borrower. This is usually a relative who lives in the home, but won’t be listed on the mortgage. And lastly, you can include income from renters. Usually, up to 30% of the addition income from the renter is used to help determine if the borrower is qualified for a mortgage.
HomeReady™ Mortgage Program: Quick Recap
There are pros and cons to every mortgage program and it’s important to research both to get a better understanding of the mortgage program you are looking into. The HomeReady™ Mortgage Program was created by Fannie Mae and designed for big families who all live together in the same house. You can use income from other family members to qualify for the HomeReady™ mortgage program. You can rent a room to someone and include 30% of that extra income to help you qualify for a mortgage. The minimum credit score to qualify for the HomeReady™ program is 620 and the HomeReady™ program offers a low down payment of only 3.0% of the purchase price.
In addition to being knowledgeable about the HomeReady™ Mortgage Program or any mortgage program that is, it’s important to shop around for a lender who is also knowledgeable and qualified. Not every lender will off the HomeReady™ Mortgage Program, and many who do offer it will have different guidelines and requirements. It’s important to shop around and compare lenders in order to find the best lender that fits your situation. To find out more information regarding the HomeReady™ Mortgage Program or to speak with a qualified lender to find the right mortgage program for you, click below on the little orange button. We can help get you matched with the perfect lender who will fit your needs.
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