Are you ready?
HomeReady®, that is. If you haven’t heard, HomeReady is a Fannie Mae mortgage program that makes it easier than ever for many Americans to purchase a home.
Made for homebuyers with low to moderate income, this loan program is packed with loads of perks: a small down payment, cancellable mortgage insurance, lender paid mortgage insurance, flexible underwriting, and much more. In fact, it could be a wish granted for many would-be homebuyers across the country.
Before you race to your lender’s office to sign up, it helps to get the basic facts to see if HomeReady may be right for you. You’ve got questions; we’ve got answers.
Q: First things first – who qualifies?
A: HomeReady was created to help underserved borrowers make homeownership more attainable. Income is the main qualifier. In most parts of the country, you need to earn less than the median income for the area. However, some designated low-income areas have no income cap at all. Fannie Mae even created this eligibility tool to locate specific requirements for your region!
Q: Does my credit score matter?
A: Sure, but only to an extent. To get competitive pricing on your loan, it’s recommended to have a credit score greater than or equal to 680. However, you could still qualify with a less-than-perfect score.
Q: What’s the difference between HomeReady and an FHA loan?
A: HomeReady and FHA loans have a lot of similarities, but there are a few important differences that set them apart.
First, an FHA loan offers a down payment as low as 3.5%, while a HomeReady can be as low as 3%. Also, an FHA loan requires additional mortgage insurance throughout the life of the loan. With HomeReady, mortgage insurance is cancellable.
However, HomeReady may be more stringent when it comes to the borrower’s creditworthiness. Although a higher score can get you a more favorable price for both loans, FHA requirements are slightly more flexible with less-than-perfect credit.
Q: What if I don’t have enough money for a down payment?
A: Good news, homebuyers! HomeReady features no minimum cash contribution from your own pocket. This means that you can accept gifts, grants, and other contributions to help toward your down payment–especially helpful for first time homebuyers.
Q: My debt-to-income (DTI) ratio is kind of high. Is that a problem?
A: It may be, but HomeReady has a unique feature that could help: When calculating your DTI, lenders can take into account income from roommates or family members living in your household, even if they are not co-signers or contributors toward the loan. Even better? This additional income does not count toward your eligibility limit.
Q: What’s the catch?
A: To qualify, you’ll just need to take a brief course. It’s really not a “catch,” but more like a way to empower homebuyers to be successful in the long run. This short class takes you through the ins and outs of your loan, best practices, and advice to help you make the most out of your investment. You can even substitute this course with pre-purchase advising from a HUD-approved nonprofit housing counseling agency.
Q: So, we’ll ask again: Are you ready?
A: If you’re eager to learn more, let’s keep going. Don’t assume buying a home is out of reach. You might be surprised by how attainable it could be.
To find out if you’re potentially eligible for a HomeReady loan, Fannie Mae has provided an income eligibility lookup tool to see if you meet the minimum requirements. You can also call ditech directly at 1-800-700-9212 and speak to one of our Home Loan Specialists, who would be happy to help you, and answer any additional questions not covered here.