FNMA HomeReady® Loan

What is the FNMA HomeReady® Loan?

Designed to help creditworthy low-to-moderate income households overcome the obstacles to affordable homeownership, this program offers borrowers an opportunity to build wealth and strengthen communities by providing affordable fixed rate loans with more flexible underwriting requirements.

The FNMA HomeReady® loan offers some of the most important elements that borrowers facing economic challenges need like no income limits in low-income census tracts, lower MI coverage, and a fixed-rate fully amortizing product, which offers rate and payment (principal and interest) stability for borrowers.

FNMA HomeReady® Loan Basics

  • Serves creditworthy low- to moderate-income borrowers
  • Borrower not required to be first-time buyer
  • No income limits in low-income census tracts
  • Purchase and Refinance Options
  • 3% borrower contribution on 2-4 units
  • Cancellable Mortgage Insurance
  • Lower MI coverage
  • 10, 15, 20, and 30 year Fully Amortizing fixed rate
  • 620 minimum qualifying credit score

What are the benefits?

Low Down Payment

This loan is attractive to potential homebuyers with low to moderate income levels because it offers a down payment requirement as low as 3% for a one unit home with a fixed rate mortgage. The down payment needed is higher for adjustable rate financing and multi-unit properties.

Flexible Sources of Funds

Proof of sourced or seasoned funds aren’t required for the FNMA HomeReady® loan down payment and closing costs. Borrowers can use gifts, grant funds, and cash on hand as source of necessary funds.

Homeownership Course

The online Framework® course is a loan requirement for this program, but it’s beneficial to borrowers by helping them learn about sustainable homeownership, as well as helping them understand the loan process so they are better prepared and know what to expect as they move from home search to loan application to closing.

Who is eligible for HomeReady® Financing?

The HomeReady® mortgage is an ideal solution for low-to-moderate income borrowers looking to gain economic security through owning a home. Some of the eligibility requirements include the following:

  • No income limits in low-income census tracts
  • 100% of AMI in high-minority census tracts or designated disaster areas
  • 80% of AMI on all other census tracts

Borrowers who occupy the Property may not have an ownership interest in any other residential dwelling at the time of closing. This restriction does not apply to a non-occupant co-borrower. A manufacturered home, regardless of the type of land ownership, is considered a residential dwelling for this purpose. Ownership in a timeshare, either as a deeded interest or a right-to-use arrangement, is not considered ownership in a residential dwelling for this purpose.

At least one borrower must complete a Fannie Mae approved online pre-purchase homeownership education program through Framework, and receive a referral to housing counseling prior to the close of the loan.

In which scenarios is the FNMA HomeReady® Loan Useful?

This can be an ideal program for borrowers who can afford the monthly mortgage payments, but don’t have enough available funds for a great deal of up front expenses such as a large down payment, or substantial closing costs.

Some conventional mortgage loans don’t allow borrowers to apply financial gifts from family members as down payments. Or if they do, it’s a restricted amount, which means a good portion has to come from the borrower’s own pocket. This can put homeownership out of sights for some. Because this program allows gifts, grants, and cash-on-hand as a source of funds for the down payment and closing costs, creditworthy low- to-moderate income borrowers have a pathway to homeownership, which is a key means for building wealth and economic opportunity.

Buying a Home with a FNMA HomeReady® Loan

The FNMA HomeReady® loan tackles the common financial challenges that many low-to-moderate borrowers face and offers increased flexibility like considering the income from a non-borrower household member, including children, grandparents, and other extended family members. Non-relatives may also help buyers financially qualify for this mortgage. In addition, the program allows for co-borrowers who don’t live in the property to help a buyer qualify for a mortgage.

HomeReady® Refinancing

The FNMA HomeReady® loan not only helps put low-to-moderate income families on a pathway to homeownership and economic security, this program can also be used to refinance an existing mortgage with a Limited Cash Out Refinance.

Through this program, existing Fannie Mae loan holders in need of more favorable loan terms can use their equity to pay off the mortgage-related debt and receive a limited amount of money back at closing. HomeReady® allows financing of up to 97% of the home’s value.

Other Programs to Consider

If the FNMA HomeReady® Loan is not an ideal fit for a particular scenario here are a few other products to explore:

  • Provides affordable home ownership opportunities in rural areas: USDA Fully Amortizing Fixed

  • Streamlined, simplified FHA refinance option for current FHA homeowners: FHA Streamline Refinance

  • HUD-owned homes made easier and more affordable to purchase: FHA $100 Down program