- HomeReady is a Fannie Mae program for low-income borrowers.
- It offers low down payments, low financing costs, and low mortgage insurance costs.
- Borrowers have flexibility in obtaining the funds for down payments.
The HomeReady mortgage program sponsored by Fannie Mae is designed to assist mortgage lenders in serving credit-worthy low-income borrowers. Key features of a HomeReady mortgage are a very low down payment of 3% and pricing that is better than or equal to standard pricing.
A broadly similar program from Freddie Mac is called Home Possible.
Eligible borrowers will have credit scores of 620 or greater, while those scored at 680 or more may receive even better pricing. The HomeReady program is open to first-time and repeat homebuyers, as well as those seeking to refinance an existing mortgage. HomeReady also offers affordable mortgage insurance coverage.
Effective July 20, 2019, eligible borrowers are those whose income is 80% or less of the area median income (AMI) for the census tract in which the property is located. This includes properties in low-income census tracts. Moreover, a borrower under the HomeReady program may have ownership interests in other residential properties, but only one of those other properties may be financed at the time of closing a HomeReady mortgage.
Benefits For Borrowers
In addition to a low down payment of 3%, HomeReady mortgages offer pricing that is better than or equal to standard loan pricing. The program also offers lower than standard mortgage insurance coverage requirements when the loan-to-value (LTV) ratio is between 90% and 97%, plus the ability for the borrower to cancel monthly mortgage insurance payments when the LTV ratio drops below 80%.
Additionally, the borrower is not required to use a minimum amount of personal funds for the down payment and closing costs, but instead may tap other sources such as gifts, grants, and Community Seconds mortgages. Community Seconds are second mortgages that are used to fund down payments and closing costs on first mortgages that are delivered to Fannie Mae.
Meanwhile, Fannie Mae has decided to postpone the assessment of an "adverse market" fee on refinancing transactions that is designed to recoup estimated losses of $6 billion due to COVID-19.
Benefits For Lenders
Fannie Mae's Desktop Underwriter (DU) system automatically identifies loans that may be eligible for HomeReady, while offering a credit risk assessment. In addition to pricing that is better than or equal to Fannie Mae's standard pricing, lenders also can receive risk-based pricing waivers for borrowers with credit scores of 680 or greater and LTV ratios over 80%. HomeReady loans also can be combined with standard loans in MBS pools and whole loan commitments.