Homeownership can be difficult. Simply obtaining a mortgage, which requires a strong income, sizable downpayment, and decent credit score, can be challenging.
Realizing that many low-income people struggle to reach mortgage approval, Fannie Mae, a government-supported company, created the HomeReady Mortgage program. This program makes getting a mortgage much easier for low- and moderate-income people, and it could be the key to unlocking your future mortgage and your future home!
This program, while simple, may seem confusing. We get many questions about HomeReady, so we’d like to help by answering a few of the most common questions…
Frequently Asked Questions About the HomeReady Program
Question: What is The HomeReady mortgage?
Answer: The HomeReady Mortgage program, often referred to simply as “HomeReady” is a program intended to support homeownership among low- and moderate-income people. The programs allows lenders to serve creditworthy people who do not have a large income that would help them qualify for other forms of financing. It is designed specifically for low-income and minority communities, as well as areas that have been impacted by disaster.
This program creates access to affordable loans, creating a mortgage option to buyers who may not otherwise qualify for a home loan. Buyers who may not have the resources to make purchases could be eligible thanks to the HomeReady Mortgage program.
Question: What are the program highlights?
Answer: Honestly, there are a variety of benefits to borrowers. Overall, if you choose the HomeReady program, you’ll have a lower initial cost, allowing you to enter homeownership much faster. There are also lower long-term costs, which makes owning a home more sustainable in the future,
With these loans, you can secure financing with as little as 3% down. That amounts to $3,000 for every $100,0000 in purchase price, and it’s much less than the 5% or even 10% required by other mortgage programs.
At 3% down, a $200,000 purchase would require $6,000 for a downpayment. By comparison, a 5% downpayment would be $10,000, while a 10% downpayment would total $20,000.
Although not all borrowers will qualify for the 3% down, and some may need 3.5% or higher depending on their situation, this makes the initial costs far more affordable.
Numerous Downpayment Sources Allowed
The downpayment requirements are light, and borrowers can obtain the cash from a variety of sources. Of course, you can use your own savings, but you can also use gifts, grants, and government programs to generate the downpayment.
Each mortgage will have different requirements. However, most can expect lower interest rates than many other programs. Because these programs have the support of the federal government (through Fannie Mae), lenders can offer rates that are lower than other options.
Cancellable Low-Cost Mortgage Insurance
To make the loan even more affordable, borrowers can get low-cost mortgage insurance, which is paid by the homeowner and protects the loan against default. This insurance is also “cancellable,” so once you reach a certain level of equity you can drop the insurance and stop making payments.
Question: Who is eligible for this program?
Answer: First of all, the program is available all throughout the country; there are no regions where you cannot use it. However, there are restrictions on who can use it. Specifically you need to have an income that is less than the median income for your area. Different regions, it should be remembered, will have different income restrictions. (After all, a $40,000 income in the heart of San Diego is different than a $40,000 income in, say, rural Iowa.)
To be eligible, you cannot own any other residences in the United States. You won’t have to be a first-time homebuyer (perhaps you owned a property in the past), but you can’t be a current property owner.
You will also need to meet credit requirements, but this is fairly light. Only a 620 score is required.
Other than those three requirements, there really are no other eligibility requirements.
Question: Who is the ideal candidate for this program?
Answer: There are many different people who would certainly be eligible for the program, people who would likely benefit from the low interest and light downpayment requirements. However, it seems that the ideal candidate for this program is someone who earns well below the area’s typical income and does not have a large downpayment.
If you are currently struggling to qualify for a mortgage because your income is too low, you can’t save for a large downpayment, or your credit is making qualification a challenge, you may be the ideal candidate for the HomeReady program.
Question: Are there any exceptions or drawbacks to this program?
Answer: There are some drawbacks, but quite frankly these “drawbacks” are built in to the program. They are intentional.
The biggest drawback is the income restrictions. The program is intended specifically for low-income individuals, so even if you have a moderate income that is just slightly above the area’s median, you will be ineligible. There are some exceptions based on the property’s location, but overall this restriction will limit many potential users.
Question: What could be some common reasons for ineligibility?
Answer: The main reasons someone will be ineligible for the program is income. As we have discussed, there are limits to how much you can earn and still be able to use the program. Keep this in mind when you are planning to use the program and check your income against the area’s median.
Question: What do I have to do to use this loan?
Answer: If you are eligible, to use this program you will need to complete homeownership education and counseling. This education is delivered through an online program and usually takes about four to six hours to complete. There is also a $75 fee to access the education. This program will teach the basic fundamentals of buying and owning a home, as well as the details of using a mortgage.
Borrowers also have to access ongoing homeownership support.
Apply for the HomeReady Program Today!
If you want to learn more about the HomeReady program, contact our staff today. We’ll help you choose the right mortgage for your specific needs.
From HomeReady Mortgage loans for comfortable houses to jumbo loans for high-end properties, we can help with all of your property purchases!