What is the FNMA HomeReady® Loan? Designed to help creditworthy low-to-moderate income households overcome the obstacles to affordable homeownership, this program offers borrowers an opportunity to build wealth and strengthen communities by providing affordable fixed rate loans with more flexible underwriting requirements. The FNMA HomeReady® loan offers some of the most important elements that borrowers facing economic challenges need like no income limits in low-income census tracts, lower MI coverage, and a fixed-rate fully amortizing product, which offers rate and payment (principal and interest) stability for borrowers. FNMA HomeReady® Loan Basics Serves creditworthy low- to moderate-income borrowers Borrower not required to be first-time buyer No income limits in low-income census tracts Purchase and Refinance Options 3% borrower contribution on 2-4 units Cancellable Mortgage Insurance Lower MI coverage 10, 15, 20, and 30 year Fully Amortizing fixed rate 620 minimum qualifying credit score What are the benefits? Low Down Payment This loan is attractive to potential homebuyers with low to moderate income levels because it offers a down payment requirement as low as 3% for a one unit home with a fixed rate mortgage. The down payment needed is higher for adjustable rate financing and multi-unit properties. Flexible Sources of Funds Proof of sourced or seasoned funds aren’t required for the FNMA HomeReady® loan down payment and closing costs. Borrowers can use gifts, grant funds, and cash on hand as source of necessary funds. Homeownership Course The online Framework® course is a loan requirement for this program, but it’s beneficial to borrowers by helping them learn about sustainable homeownership, as well as helping them understand the loan process so they are better prepared and know what to expect as they move from home search to loan application to closing. Who is eligible for HomeReady® Financing? The HomeReady® mortgage is an ideal solution for low-to-moderate income borrowers looking to gain economic security through owning a home. Some of the eligibility requirements include the following: No income limits in low-income census tracts 100% of AMI in high-minority census tracts or designated disaster areas 80% of AMI on all other census tracts Borrowers who occupy the Property may not have an ownership interest in any other residential dwelling at the time of closing. This restriction does not apply to a non-occupant co-borrower. A manufacturered home, regardless of the type of land ownership, is considered a residential dwelling for this purpose. Ownership in a timeshare, either as a deeded interest or a right-to-use arrangement, is not considered ownership in a residential dwelling for this purpose. At least one borrower must complete a Fannie Mae approved online pre-purchase homeownership education program through Framework, and receive a referral to housing counseling prior to the close of the loan. In which scenarios is the FNMA HomeReady® Loan Useful? This can be an ideal program for borrowers who can afford the monthly mortgage payments, but don’t have enough available funds for a great deal of up front expenses such as a large down payment, or substantial closing costs. Some conventional mortgage loans don’t allow borrowers to apply financial gifts from family members as down payments. Or if they do, it’s a restricted amount, which means a good portion has to come from the borrower’s own pocket. This can put homeownership out of sights for some. Because this program allows gifts, grants, and cash-on-hand as a source of funds for the down payment and closing costs, creditworthy low- to-moderate income borrowers have a pathway to homeownership, which is a key means for building wealth and economic opportunity. Buying a Home with a FNMA HomeReady® Loan The FNMA HomeReady® loan tackles the common financial challenges that many low-to-moderate borrowers face and offers increased flexibility like considering the income from a non-borrower household member, including children, grandparents, and other extended family members. Non-relatives may also help buyers financially qualify for this mortgage. In addition, the program allows for co-borrowers who don’t live in the property to help a buyer qualify for a mortgage. HomeReady® Refinancing The FNMA HomeReady® loan not only helps put low-to-moderate income families on a pathway to homeownership and economic security, this program can also be used to refinance an existing mortgage with a Limited Cash Out Refinance. Through this program, existing Fannie Mae loan holders in need of more favorable loan terms can use their equity to pay off the mortgage-related debt and receive a limited amount of money back at closing. HomeReady® allows financing of up to 97% of the home’s value.
What is the FHLMC Home Possible® Program?
The FHLMC Home Possible® mortgages offer outstanding flexibility and options to meet a variety of borrowers’ needs. With Home Possible, you’ll capitalize on opportunities to meet the home financing needs of low and moderate-income borrowers looking for low down payment and flexible sources of funds.
FHLMC Home Possible® Basics
Designed to help low- and moderate-income households obtain homeownership through affordable financing without having to make a large down payment
620 minimum qualifying credit score for all qualifying borrowers
Max LTV up to 97%, TLTV up to 105%
15, 20, 25 and 30 year fully amortizing fixed rate terms available
Available for purchase or no cash out refinance
What are the benefits?
Lower Credit Scores Accepted
A borrower with FICO scores of as low as 620 may be eligible for the FHLMC Home Possible® program.
Flexible Terms
The FHLMC Home Possible® is available in 15, 20, 25 or 30 year fixed rate terms. This provides some flexibility in the amount of time borrowers have to pay off their loans.
Fixed Rates
This program offers fixed rates, allowing each borrower’s principal and interest payments to stay the same, despite fluctuations in the mortgage market.
Low Down Payment, Low Reserves
With the FHLMC Home Possible® loan, borrowers can buy a home for as little as 3% down for 1-4 unit primary residences.
1-4 unit: 95% LTV/TLVT/HTLVT
Manufactured homes: Refer to Freddie Mac Service Guide Chapter H33
No minimum borrower contribution on 1 unit, as low as 3% for 2-4 unit properties
In which scenarios is the FHLMC Home Possible® a good option?
The FHLMC Home Possible® loan program is an ideal solution for low- to moderate-income borrowers without much cash reserves for a down payment. Here are a few specific scenarios for which an FHLMC Home Possible loan may make sense:
A first time borrower with less-than-perfect credit and low cash reserves needing financing for a 1-unit primary residence
A current low-income homeowner with 5%+ equity is interested in refinancing in order to reduce their mortgage interest rate and/or monthly mortgage payment
A borrower who meets all income/debt/asset requirements is purchasing a duplex and intends to live full-time in one unit and rent the other unit out
Buying a Home with an FHLMC Home Possible® Loan
Borrowers can purchase a home with the FHLMC Home Possible® program by meeting the necessary eligibility requirements for the program. Financing through the FHLMC Home Possible® program allows borrowers who are in moderate to low income brackets to buy a home with up to 97% LTV.
For the Home Possible program, borrowers will need to first evaluate if they meet the income restrictions for their area. Income limits vary by location.
Once income qualification has been established, the borrower and lender can proceed as normal through the rest of the loan process.
FHLMC Home Possible® Refinancing
Borrowers can utilize a no cash out refinance option through the FHLMC Home Possible® program. Cash out refinancing is unavailable for this program.
