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What is a HomeReed Mortgage?
Homeready mortgages are a type of traditional loans that help low-income borrowers buy homes and refinances. To qualify, your income cannot exceed 80% of the median income in your area (or the area you plan to purchase).
The main attraction of Home Leede Loans is the low down payment requirements. It’s only 3% of the purchase price of a home. That down payment can come from a variety of sources, including gifts and support grants from family and friends.
However, it can only be used in major residences. Can be used in single family independent homes or qualified condominiums, cooperatives, or manufactured homes. It can also be used for duplex, triplex, or four-unit properties if you live in one of the units as your primary residence.
This type of loan is often a 30-year fixed-rate mortgage, but can also be used with 10-, 15-, or 20-year fixed-rate terms. There is also an adjustable version available for five, seven, and ten years conditions.
HomeReady loans are supported by government-sponsored company (GSE) Fannie Mae, but are funded by mortgage lenders. Apply and close your mortgage through a bank, credit union, savings, loans, or other mortgage lender.
HomeReady Mortgage Requirements
To qualify for a HomeReede mortgage, you must:
- 620 lowest credit score
- 3% down payment
- Revenue of less than 80% of the regional median income (AMI). You can check the AMI limits for your location using Fanny’s May lookup tool
- Debt income (DTI) ratio of less than 45% (or up to 50% depending on the situation)
If you are a first-time home buyer, you will need to complete a home buyer education course.
Currently, you can have one funded asset in your name (in addition to what you are purchasing) according to the Fannie Mae guidelines.
Pros and cons of HomeReedy’s mortgage
Strong Points
- Low down payment: HomeReady Mortgages only needs to drop 3%. These funds don’t have to come from your personal savings. For example, you can use gifts from relatives or friends.
- Reduced mortgage insurance: If you use a traditional loan, you will need to pay private mortgage insurance if you cut below 20%. The HomeReady program reduces the premiums for borrowers who have reduced these premiums by less than 10%. Plus, once you pay your mortgage at 80% of the home price, you can request that you cancel the premium.
- Rental income from application form: When applying for a HomeReady loan, projected rental income can be included as part of your eligible income, increasing the likelihood of approval. This can help borrowers who want funds for the property they live and rent.
- Can be used for refinance: You can refinance your current mortgage using a HomeReede mortgage. This allows you to obtain more favorable loan terms, such as lower interest rates and reduced monthly payments.
Cons
- Income limit: Your income cannot exceed 80% of your local median income. You can use Fannie Mae’s lookup tool to see if you are eligible based on your income.
- Property limit type: HomeReady loans cannot be used to purchase second or holiday properties.
- Loan size limit: The HomeReady program is subject to compliance with loan restrictions. In 2025, you won’t be able to rent more than $806,500 for a detached home in most areas. (Some cost areas, such as Alaska, California, and parts of Hawaii, have higher limits.)
What borrowers need to know about today’s Home Leedy Loans
HomeReady Mortgages offers a more flexible route to funding for low-income borrowers. In addition to the 3% down payment lowest and affordable mortgage insurance, the program currently offers $2,500 in lender credit to first-time home buyers with incomes of less than 50% of their local median income. Credits can be applied to down payments, closing costs, or other aspects of the transaction. Valid for eligible loans until February 28, 2026.
