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HomeReady® is the name of Fannie Mae’s 3% down payment mortgage loan. It’s an affordable mortgage program for first-time home buyers that’s also available to repeat buyers and existing homeowners for refinance.

Fannie Mae launched HomeReady in 2014. The program replaced the agency’s MyCommunity Mortgage program, which was restrictive and limiting. HomeReady created new, flexible, affordable homeownership options for low- and moderate-income buyers; it allows for a minimum down payment of 3% and subsidizes mortgage rates and loan costs.

Who’s eligible for the Fannie Mae HomeReady mortgage?

HomeReady eligibility is checklist-based. Buyers who meet each criterion are eligible for the program and assigned to it automatically.

Qualifying for HomeReady doesn’t require a separate mortgage application. Here are the requirements:

  • You must occupy the home you’re financing. HomeReady is for primary residences only. Home buyers can’t use it to finance a vacation home, Airbnb property or another type of investment property. Co-signers are allowed, and at least one person listed on the mortgage must live in the property.
  • Your home must be a residential property. HomeReady is for attached or detached single-family residences, including townhomes, condos, rowhomes and multi-unit homes of four units or fewer. Manufactured homes may be eligible. Commercial properties aren’t allowed. 
  • Your mortgage must meet conforming mortgage guidelines. HomeReady is a Fannie Mae mortgage program, which means loans must meet Fannie Mae’s conforming mortgage guidelines. Loan sizes must be within local conforming loan limits, buyers must provide proof of income and loans can’t be interest-only.
  • Your down payment must be at least 3%. HomeReady allows a loan-to-value (LTV) up to 97 percent of the purchase price. Buyers must make a minimum 3% down payment, which may come from any eligible source. Eligible sources include government down payment assistance programs, cash gifts from family or friends, cash grants and loans.
  • Your income must be below average for your census tract. Household income for HomeReady homeowners may not exceed eighty percent of the median household income in the home’s census tract. Home buyers who earn too much money for HomeReady can access other low down payment loans, including the Conventional 97 program and the FHA 3.5% down payment mortgage.
  • You may not owe money on more than one other mortgaged home. HomeReady allows home buyers to have a financial interest in one other mortgaged property, which may be a vacation home, short-term rental property or an investment. There are no restrictions on commercial property investments.
  • You must have a credit score of 620 or higher. HomeReady requires a minimum credit score of 620 for 1-unit and multi-unit homes. Fannie Mae uses the FICO credit scoring system, which ignores medical debt and collections. 
  • You must attend a homeownership education class. Fannie Mae requires first-time homebuyers to complete a homeownership education course as part of a HomeReady approval. The mortgage agency offers an online educational course called HomeView at no cost. Homeownership education reduces mortgage default risk by 42%. 

HomeReady income limits

Fannie Mae created HomeReady in 2014 to help low- and moderate-income renters achieve their American Dream of homeownership, where low-to-moderate income is defined as earning less annual income than your closest neighbors.

HomeReady homebuyers may not earn more than 80% of their new home’s census tract’s income. Fannie Mae makes income limits available on its website as shown below.

HomeReady can be used in city, suburban and rural areas. It lowers down payment requirements to 3%, drops mortgage rates to less expensive levels, and makes owning a home cheaper, faster and easier.

HomeReady, accessory dwelling units (ADU) and boarder income

When Fannie Mae first announced its HomeReady mortgage in 2014, the agency advertised the program as a mortgage for multi-generational households. It permitted boarder income from parents, grandparents, and children, all living under one roof and contributing to monthly payments.

The program expanded several years later to allow accessory dwelling units (ADU). An accessory unit is an area with a kitchen and a bathroom within another home, usually with its own entrance.  Accessory units may be in the basement, above the garage or attached to the subject property. ADUs may also be separate homes on the land of an existing property.

Homebuyers can use income from boarders and accessory units to qualify for a HomeReady mortgage.

With boarder income, buyers can use payments received, dollar-for-dollar, as income toward the mortgage. Proof of payment can be in the form of canceled checks, Venmo or other digital transfers, or bank statements showing deposits into a bank account.

Income from accessory dwelling units can’t be used dollar-for-dollar as income on an application. Lenders will deduct 25% from rent collected on an ADU to account for vacancies and costs. Homebuyers are recommended, but not required, to use signed lease agreements proving their rental income. 

HomeReady mortgage rates and mortgage insurance

HomeReady is an affordable mortgage program offering subsidized mortgage rates to low- and moderate-income households. 

A HomeReady buyer with an average credit score gets access to mortgage rates 0.25 percentage points below standard conventional rates. Buyers with high credit scores receive rates discounted by as much as 0.75 percentage points.

In addition, HomeReady discounts private mortgage insurance for eligible buyers. The typical HomeReady homeowner pays less for PMI and saves hundreds of dollars on mortgage insurance annually.

Because Fannie Mae discounts mortgage rates and private mortgage insurance, HomeReady homebuyers save as much as $700 per $100,000 borrowed per year compared to standard mortgage borrowers.

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