Fannie Mae HomeReady is a new program that was released recently to allow low to moderate income borrowers with expanded eligibility for financing homes in designated low-income, minority and disaster impacted communities.
This program allows up to 97% financing on 1-unit purchases (only 3% down) and there is also no minimum borrower contribution. You’re able to use gifts from family members, grants and cash-on-hand to use towards the down payment.
There are some key points that stand out within this program that aren’t similar to a typical conventional loan. I’ll explain a few of those below:
- Non-Occupant co-borrowers are allowed (max loan to value is 95%) and income is considered
- Non-Borrower income can be used (I’ll talk more about this below)
- No Income Limit for properties in low-income census tracts
- First Time Homebuyer is NOT required, however you must not have any ownership interest in any property
- 100% of AMI (Area Median Income) Properties in high-minority census tracts and designated disaster areas.
- 80% of AMI for all other properties
- AMI – Area Median Income data source from FHFA (Click Here to View the Income LookUp Tool)
- Pricing that is better than or equal to standard loan pricing
- Lower than standard mortgage insurance coverage requirements for loans with LTVs greater than 90% up to 97%
What does non-borrower income mean? Non-borrowers are typically extended-family living arrangements (non-borrower household members may be relatives or non-relatives) which are more common among underserved populations including low-to moderate income, minority and immigrant households. The income from the non-borrower is considered qualifying income and subject to applicable income limits.
*Key fact: Non-Borrower income must be at least 30% of the total qualifying income being used*
Ultimately what we now understand about this program is that there are ways to qualify a borrower that you wouldn’t typically be able to with the expanded guidelines. It is a lower down payment option of only 3% and you’re able to take advantages of the conventional programs. I personally have priced out a few different scenarios with both 3% and 5% down, and the interest rates are almost identical.
If you would like more information about this program please feel free to contact myself or our staff here at LoanSafe.org at 800-779-4547, and we have a team of licensed loan officers who can help guide you through the program. Or you can apply online here: www.loansbyerik.com.
You can also ask questions in our mortgage forum on this program at this link.