Home Ready Mortgage – 3% Low Down payment
Here is a 3% low down payment mortgage that plenty of Americans could possibly easily qualify for to buy a house – it is called HomeReady® Mortgage backed by Fannie Mae and launched in August 2015. The message is clear, if you are a hardworking person and/or family, would like to own your own home, take good care of your credit and bills, have some money saved or can pool together, or successfully qualify to get assistance through California’s downpayment assistance programs and possibly only come up with $500, and all the “right” stars align, you can definitely buy a house. And yes, you can get an affordable mortgage, too!
About Fannie Mae’s Home Ready Mortgage
Mortgage Down payment requirement : 3%
HomeReady Mortgage requires a low 3% down payment – for example, $12,000 down payment on a $400,000 home. This is lower than the 3.5% down payment required by FHA backed loans and a minimum of 5% to 20% on other conventional loans.
The source of the down payment could come from gifts from relatives, grant, or other qualifying downpayment assistance programs.
Who is HomeReady Mortgage for?
According to Fannie Mae, Home Ready Mortgage is designed to “help creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities.”
Mortgage for First Time Buyers and Repeat Buyers
This loan is available to buyers who currently do not own a home (first time buyers or repeat buyers are ok), low to medium income, OR for those with high income AND are also buying a home in a qualifying census tract.
You must not own any other residential property at the time of closing on a Home Ready Mortgage to qualify.
What makes HomeReady Mortgage different from the other home loans out there?
This mortgage product seems to be less strict than other mortgage products. You have heard that it’s harder to get a mortgage these days. This loan program, however, is meant to hopefully turn you into a believer that responsible homeownership is still possible.
Special features of the HomeReady Mortgage:
- Non-borrowers (i.e. relatives, friends) may help you with the down payment
- Non-borrowers (i.e. relatives, friends) may help you qualify for the loan
- Rental income from an accessory unit/ second dwelling can be used to qualify
- Online home buyer training must be completed to help prepare you with the responsibilities of homeownership.
If you have excellent credit, or even an average credit (at least 620 FICO score), or no traditional credit (but can prove that you pay all your other bills such as rent, utilities, gym membership on time), or perhaps you may have had a foreclosure 7 years ago or a short sale 4 years ago, do not currently own a residential home, and have qualifying income, with all monthly debt (including total housing payments) that amounts to no more than 45% of your gross monthly income (or up to 50% if you have compensating factor such as additional income from relatives or people who will occupy the home with you for at least 12 months) and meet ALL the eligibility requirements, then it is likely that Fannie Mae’s new low down payment mortgage might be a viable loan option for you to buy your first home (or buy another house again).
If you have had a short sale, foreclosure, or bankruptcy, please read our article on Buying a home after a short sale or foreclosure here.
For more information, please be sure to fill out the pre-approval contact form below. We have a team of lenders and real estate professionals who are ready to help you.
Below are helpful links for Home Ready Mortgage Eligibility information
Please also be sure to fill out the pre-approval contact form below to receive detailed information that applies to your own personal situation. We have a team of real estate professionals and Fannie Mae approved lenders who are ready to help you and answer any of your questions.
Mortgage Rates and Closing Costs
Home Ready Mortgage rates and closing costs are lower than or the same as traditional mortgages. Even the monthly mortgage insurance premium (to insure against default) is lower than other loan programs with less than 20% downpayment.
Please fill out the inquiry form below for more information to get a full picture of this loan program and or/ other available programs that apply to your own personal situation, credit, income, and property location preference.
Flexible Mortgage to help people afford home ownership
Once you read the guidelines and the details of HomeReady Mortgage, it becomes obvious that this low down payment mortgage has a lot of flexibility.
Read the Q and A on Home Ready Mortgage here for more information.
The added flexibilities for lenders allow them to consider income from a non-borrower household member as a compensating factor in determining an applicable debt-to-income ratio for a loan (i.e from 45% debt to income (DTI) ratio to 50% DTI.
This is a huge deal since based on Walt Scott’s report titled “Mortgage Lending and Non-Borrower Household Income: A Fannie Mae Housing Working Paper”, extended income households (EIHs are common in some minority and low-income Hispanic, African American, and Asian communities) are better able to weather economic shocks as they share spaces and income.
This feature of helping qualify borrowers could help more multigenerational and extended family households obtain affordable mortgages and own their homes. In the past, many home buyers could not qualify for mortgages although they had extended resources and support from i.e. a renter/boarder, family, relatives to be able to afford one.
For those who are leary of this new type mortgage programs as it reminds us of sub-prime mortgages that contributed to the recent housing crisis, Scott’s research, indicates that households with mortgages between 2005 and 2013, showed that extended income households were better able to withstand negative shocks to borrowers’ income and were more likely to stay in their homes when facing financial difficulty than non-EIH households.
Read the story of how this mortgage product came about – How intuition and caring for foster children led to a transformative mortgage product.
Let us help you learn more about your options to be able to buy a house
If you have any questions regarding all your home buying options, please be sure to fill out the form below so we can introduce you to the right real estate lender and real estate agent (if you are not already currently working with one). Thank you!