Fannie Mae HomeReady Mortgage Guidelines
This guide covers Fannie Mae HomeReady mortgage guidelines on conventional loans. There are two home loan programs: government loans, which are insured by government agencies, and FHA, VA, and USDA, which are government loans. Conventional loans that are not insured or have government or agency insurance This article will cover and discuss the Fannie Mae HomeReady mortgage guidelines and requirements.
With the overwhelming variety of mortgage products available, many Americans do not know about the Fannie Mae HomeReady mortgage program by Fannie Mae.
This is an amazing mortgage product designed to help low-to-moderate-income borrowers. It also gives lenders the confidence to make these loans. There are some advantages to using the Fannie Mae HomeReady mortgage program over FHA financing.
What Is Fannie Mae HomeReady Mortgage Program?
Fannie Mae HomeReady Mortgage is a conforming loan program created and launched by Fannie Mae to help and assist lower-income homebuyers and homeowners with decent credit to purchase or refinance their homes. Freddie Mac’s equivalent of Fannie Mae HomeReady Mortgage is called Freddie Mac Home Possible.
Fannie Mae does not require buyers to be first-time homebuyers. Buyers can own other real estate and qualify for Fannie Mae HomeReady Mortgage.
Candidates need to enroll in the required homebuyer education (online). HomeReady offers reduced down payment on home purchases. Lower private mortgage insurance premiums. There are Loan Level Pricing Adjustments (LLPA) for borrowers with lower credit scores. Maximum LLPA is capped at 1.5%. There are no minimum borrower contribution requirements. Gifted funds or not-for-profits can contribute to the down payment funds.
Fannie Mae HomeReady Versus FHA Loans
Homebuyers can purchase one to four-unit owner-occupant properties. Potential rental income on 2 to 4 units can be used as qualified income. Potential rental income is the income the home appraiser will note on the appraisal.
Mortgage underwriters may consider Income from occupant household members who are not on the loan as a compensating factor.
Non-occupant co-borrowers are allowed, but neither income can exceed the qualified income limit. Fannie Mae HomeReady mortgage product by Fannie Mae is a great alternative to FHA financing for low down payment mortgages.
Down Payment Guidelines on Fannie Mae HomeReady
Homebuyers can actually put down less than an FHA loan. Buyers must put down at least 3% to use the HomeReady loan versus 3.5% with FHA financing. The HomeReady mortgage was designed for Borrowers with limited cash for down payment. Here are a few basic requirements. Have low to moderate-income (must meet income eligibility requirements). Visit HomeReady INCOME LIMITS to see limits.
First-time home buyers or repeat home buyers are allowed for Fannie Mae HomeReady Mortgage.
For more favorable interest rates, a credit score greater than 620, ideally above 680 or more. Have limited cash for the down payment. Home Buyers who feel they meet these requirements, please get in touch with Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Either I or one of my teammates will assist and help answer any questions.
Roles of Fannie Mae and Freddie Mac
Conventional Loans are called conforming loans because they need to conform to Fannie Mae or Freddie Mac Guidelines. Many often confuse why conventional loans must meet Fannie or Freddie’s Guidelines if the government does not guarantee them.
The role of Fannie Mae and Freddie Mac is to provide market liquidity to mortgage bankers and purchase loans lenders originate and fund.
All lenders fund conventional loans with warehouse lines of credit like a giant credit card. Once they use their warehouse lines of credit, they sell the loans and relieve their lines of credit to originate and fund more loans. Fannie Mae and Freddie Mac will not purchase mortgages that do not conform to their guidelines. The Federal Housing Finance Agency (FHFA) is the government regulator that regulated both Fannie Mae and Freddie Mac.
Benefits Of HomeReady Mortgage
What are some advantages to the HomeReady program? There are instances where Conventional loans are the only route for home buyers. This holds true with borrowers with higher student loan balances.
Conforming and FHA loans allow for Income-Based Repayment (IBR). Fannie Mae and HUD requires 0.50% of the outstanding student loan balance to be used on student loans that is not on deferment.
For homebuyers with a prior mortgage included in Chapter 7 Bankruptcy, the waiting period is four years from the discharge date of Chapter 7 with conventional loans. The recorded date of the housing event does not matter. The mortgage cannot be reaffirmed after the Chapter 7 Bankruptcy. HUD requires a three-year waiting period after the finalization of the housing event (foreclosure, deed in lieu, short sale).
Get HomeReady Mortgage, Talk To Our Loan Officers
Benefits of Fannie Mae HomeReady Mortgage
Here are additional benefits of Fannie Mae HomeReady Mortgage: Cancelable mortgage insurance. This is the main advantage of FHA financing. FHA mortgage insurance does not go away when borrowers pay the loan down to 80% LTV (loan-to-value). Once Equity’s position reaches 20%, the mortgage payment will go down, and homeowners can eliminate mortgage insurance—lower Mortgage Insurance Requirements. In today’s rising rate environment, mortgage insurance premiums have skyrocketed.
The mortgage insurance coverage is only 25% for loan-to-value 90% – 97% with the HomeReady program—Low Down Payment. Homebuyers can put down as little as 3%, plus the funds can come from multiple sources.
Funds can be own funds, gifts, grants, or community second. NO MINIMUM PERSONAL FUNDS REQUIRED! There are no geographical loan amount restrictions. Does not follow the County loan limits like FHA loans. Can you use supplemental border rental income to qualify? Use the income by renting out a room of the house for qualification purposes. Non-occupying co-borrowers are allowed.
Income Limits on Fannie Mae HomeReady Mortgage
Fannie Mae HomeReady Mortgage income limit caps will be different depending on where the subject property is located. Use this link to determine the income limits for Home Ready. Fannie Mae and Freddie Mac created the Fannie Mae HomeReady Mortgage and Freddie Mac Home Possible Loan Program to promote homeownership for first-time home buyers with lower to moderate household income. HomeReady and Home Possible are great programs for homebuyers, with families living paycheck to paycheck and having little down payment towards a home purchase.
How To Start The Mortgage Pre-Approval Process
The process for acquiring a Fannie Mae HomeReady loan is the same as a regular mortgage. The only addition is buyers must complete the Framework online education program. This is a home counseling education course offered in both English and Spanish.
Some benefits of Fannie Mae HomeReady include the ability to cancel mortgage insurance. This blog will review more details about the Fannie Mae HomeReady product and some requirements.
This course is designed to give future homeowners the knowledge for sustainable homeownership. It will give home buyers the knowledge and expectations of things that may happen while owning a home. Completion of this course is part of the reason private mortgage insurance is lowered.
Start your Mortgage Pre-Approval Process With Us
Documents Required To Process Fannie Mae HomeReady Mortgage
Below is a list of common items we will require:
- Last 60 Days Bank Statements – to source down payment
- Last 30 Days Pay Stubs
- Last Two Years W2’S
- Last Two Years Tax Returns
- Driver’s License
Homebuyers who feel this program might be a good fit, please get in touch with us at Gustan Cho Associates.
