If you are buying a house, finding the right type of mortgage to finance the home is one of the most important decisions you’ll have to make. Many buyers believe they have to commit to a 20% down payment. The truth is there are options available through Fannie Mae and Freddie Mac that make lower down payments possible.
HomeReady mortgages are home loans financed through the Federal National Mortgage Association (Fannie Mae). A HomeReady loan helps borrowers with low-to-moderate incomes buy or refinance a home by reducing the down payment and mortgage insurance requirements.
However, there are certain requirements a borrower will have to meet in order to qualify for a HomeReady loan, the primary one being the income criteria. Your income must be equal to or less than 80% of your county’s area median income.
If you live in a low-income community, you may not have to worry about these income limits. Areas, where the median household income is 20% below the location’s average median household income, are considered low-income census areas. This means the borrower can make more than the income requirements and still qualify for a HomeReady mortgage.
Not only are HomeReady loans available for first-time homebuyers, but they are also a great option for repeat buyers as well. However, you can’t qualify if you still owe money on more than one other home loan.
The HomeReady mortgage requires a minimum down payment of 3%. This means, if you purchase a home for $250,000, you will need at least $7,500 down to qualify. For second-time home buyers, they will need to put down at least 5%.
Another important factor associated with getting qualified for the HomeReady loan is the homeownership education requirements. Buyers must complete a course that will help prepare them for the responsibilities that come with buying a home. The course does have a $75 cost but in the end, it will save the buyer up to $4,000 in closing costs.
If all individuals in the household are first-time home buyers, then at least one of the borrowers must complete the homeownership education course, regardless of the loan-to-value. Speak with your lender beforehand to ensure you are completing the course from a qualified provider that meets the HomeReady mortgage education requirements.
For more information and to find out if a HomeReady loan is right for you, contact our team of experienced loan officers today!