Key Fannie Mae HomeReady Mortgage Program Considerations
- Limits on mortage amount
- The borrower may be subject to maximum income limits depending on where the property is located
- Typically higher interest rate than other low/no down payment mortgage programs
- Requires borrower to pay ongoing Private Mortgage Insurance (PMI) on monthly basis
- More flexible mortgage qualificaiton requirements espicially as it related to a borrower's credit profile
- Ability to include income from non-occupant borrowers (parents), non-borrower household members (relatives) and boarders improves ability to quality for a mortgage
- No up-front or ongoing FHA mortgage insurance premium and lower private mortgage insurance (PMI) costs as compared to standard programs
- Ability to purchase a home with low down payment and no borrower contribution
1) Income from boarders. Up to 30% of the income used to determine a borrower’s ability to qualify for the mortgage can come from boarders. For example, if you rent out your basement or a spare room, this rental income can be added to the borrower’s income to determine what size mortgage the borrower qualifies for
2) Income from non-borrower household member. This is income from a relative who resides in the property but who is not listed on the mortgage. In this case, the income is used to support the borrower's application. For example, if a father lives with his son, the father’s income may be considered by the lender and used to solidify the son's loan application. Please note that income from a non-borrower household member is not added to the applicant's income to determine the applicant's ability to qualify for the mortgage and only the applicant is listed as the borrower on the mortgage. Additionally, the non-borrower household income is not counted against the income limits outlined below.
3) Income from non-occupant borrower. This is income from a parent or relative who is a borrower on the mortgage but does reside in the property. For example, a mother’s income could help a daughter qualify for a mortgage to buy a property that only the daughter will own and live in. Both the mother’s and daughter’s income are included in determining the borrower’s ability to qualify for the mortgage and both are listed as borrowers on the mortgage. Income from a non-occupant borrower is considered qualifying income and is subject to income limits outlined below. Please note that if you use income from a non-occupant borrower to qualify for a HomeReady mortgage you are required to make a down payment of at least 5%, which means your maximum loan-to-value (LTV) ratio is 95%.
The HomeReady program also has more flexible borrower qualification requirements especially as it relates to a borrower's credit profile. For example, a borrower with a credit score as low as 620 or with no or limited traditional credit history may be eligible for the program. We discuss borrower qualification requirements including credit profile guidelines in detail below.
HomeReady Mortgage Program Overview is available in the following areas/cities
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