In August 2015, Fannie Mae announced a new option for would-be homeowners who have been turned down for conventional mortgages due to lower or moderate income levels: HomeReady. The goal of the program is to recognize that today’s households encompass several generations, all of whom contribute to the well-being of all residents. If you’re a borrower who has experienced difficulties in applying for a home mortgage, here’s what you need to know about this innovative program.
Fannie Mae HomeReady Facts for Borrowers: There are a few key features of the HomeReady mortgage program that will appeal to borrowers.
- Low Down Payment: Borrowers can obtain financing for up to 97% and there are flexible options for qualifying applicants.
- Flexible Down Payment Source Options: An array of resources can be used for down payment and closing costs, with no minimum contribution requirement from the borrower’s own assets.
- Educational Programs: Borrowers can learn from educational opportunities to help them understand the implications of home buying and ownership. These programs are required under the HomeReady program.
Fannie Mae HomeReady Provisions for Non-Borrowers: HomeReady is a groundbreaking mortgage program in the sense that it allows income from a non-borrowing extended family member to be considered as a factor in determining a borrower’s debt-to-income ratio. Normally, a lender wouldn’t consider granting a mortgage to a borrower with more than 45% DIT; HomeReady accepts a DIT up to 50% for qualifying households. There are certain standards that must be met.
- The non-borrower must be a family or extended family member related by blood, marriage, adoption or legal guardianship.
- The non-borrower must sign a written statement indicating his or her intent to remain in the household.
- The non-borrower’s income must be 30% or more of the total monthly qualifying income used by the borrower listed in the HomeReady application.
Advantages of Fannie Mae HomeReady Over Other Loan Types: In passing the HomeReady program, Fannie Mae has made it easier for many consumers to get a mortgage. Prospective homeowners who may not qualify for a conventional loan because their income levels didn’t reach levels required by many lenders can now take advantage of flexible down payment options and non-borrower income to qualify for mortgages that are competitively priced and sustainable for their households.
Benefits for Lenders: The advantages of HomeReady will certainly encourage more lenders to extend mortgages to borrowers that may not otherwise qualify. For one, the mortgage pricing is equal to or more competitive that standard Fannie May pricing. Plus, lenders can combine standard and HomeReady loans into whole loan commitments for easier paperwork. Through the simplicity and certainty for lenders, more lower and moderate income borrowers will qualify for a mortgage they can afford.
Of course, eligibility for the Fannie Mae HomeReady program depends upon your unique situation. However, with this new option available, you may qualify for a mortgage that you never thought was possible under conventional loan arrangements. You can learn more about the HomeReady program and whether it’s the right fit for you by speaking with a mortgage professional.