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What Is A Homeready Mortgage?

Sometimes, homebuyers need help from other people for funding a home purchase. Some people rely on family or friends to make a down payment. Others depend on a relative, spouse, or significant other to co-sign to get approval.

If you are one of those scores of people who are in the same situation, a HomeReady loan might be right for you because it is more flexible about allowing contributions from other people.

So, what is a HomeReady loan?

A HomeReady mortgage is a conventional, yet flexible, home loan offered by Fannie Mae. It is meant to help low-income to moderate-income borrowers buy for the first time or refinance an existing loan.

You are an ideal HomeReady borrower if you have low income, are a first-time or repeat homebuyer, and have limited cash for down payment.

HomeReady loans reduce the typical down payment and mortgage insurance requirements.

It also allows family members or friends to co-sign to help get approval. So it is good for prospective buyers relying on others to help fund their home purchase.

Additionally, cash gifts from a relative, spouse, or significant other can be used for down payments. Furthermore, down payments can be as low as 3%.

HomeReady is relatively new, but it has already helped thousands of borrowers secure the home of their dreams and keep money in their pockets at the same time.

“HomeReady has already helped thousands secure the home of their dreams and keep money in their pockets at the same time.”

What Is The Benefit Of Homeready Mortgages?

Here are some advantages or benefits of a HomeReady mortgage:

  • Secure Approval with Co-BorrowersHomeReady mortgages are flexible in allowing large contribution from others to fund the costs of the loan, like the down payment and closing. Other conventional home loans are not as flexible as approval is based only on the borrower’s personal income.Fannie Mae allows co-borrowers to add their financial support to the approval process. This means that your relatives can help your chances of securing an approval even if those relatives are not planning on living in the house you are purchasing.There is no minimum for your personal contribution. You can fund your whole HomeReady loan from a gift.
  • Get Approved with Help from Income of Other People Living in Your HouseIf you don’t have a co-borrower, HomeReady loans will allow the income of people living with you to be added as compensating factors.Their incomes will not be added to yours in the approval process. However, their incomes will matter in situations where your debt-to-income ratio is higher than normal.Family members, roommates, boarders will only need to prove that they have been living with you for at least a year.Additionally, if the new house you are purchasing has space for a tenant, you can add the estimated rent as part of your income in the HomeReady loan application.
  • Lower Down PaymentHomeReady mortgages make home buying easier because of lower minimums for down payment and credit score requirements.Fannie Mae allows a loan-to-value, or LTV, ratio of up to 97% for HomeReady mortgages on single family units. This means down payments as low as 3%. This is even lower than the minimum down payment for an FHA loan, which, even with the government backing the lender, is usually 3.5%.
  • Affordable Mortgage Insurance PremiumsHomeReady loans help you minimize and even eliminate the mortgage insurance premiums faster.With HomeReady, you may have the option to cancel your mortgage insurance as soon as the home equity reaches 20%. This means lower monthly payments later on. However, there are restrictions that apply to this.Fannie Mae doesn’t include the upfront premium as part of the HomeReady closing costs. You can therefore put more into your down payment. This can potentially increase the amount you can afford to borrow.

Call Secure Choice Lending at 951-733-8925 for more details on the benefits and advantages of HomeReady mortgages.