Qualification and Mortgage Guidelines The Fannie Mae HomeReady Loan Program Can be Used to Buy a Home in Florida
HomeReady mortgages are part of a line of conventional home loans offered by Fannie Mae. The home loan program was created in 2015 and is backed by the U.S. government. This loan type is meant to assist creditworthy low-to-moderate income borrowers to buy a home in Florida.
There are key benefits of a HomeReady mortgage. Besides having lower costs, their flexible approval process allows for co-borrowers as well as contributions from others living in your home. This is an ideal loan if you have to rely on others to help you with your home purchase.
HomeReady loans typically also lower the down payment and mortgage insurance requirements.
One of the biggest challenges when buying a new home is coming up with the down payment. Contributing to this significant amount can be overwhelming for many borrowers. The HomeReady program allows borrowers to get into a $200,000 home with as little as $6,000 down, which is only 3% of the purchase price.
Advantages of a HomeReady Mortgage
- Income from other people may help you get approved.
- It allows you to accept large gifts for the down payment and closing costs.
- Down payment as low as 3% of the purchase price.
- Lower credit score requirements.
- Decreases the amount paid for PMI and allows you to cancel at 80% LTV.
- Allows family or friends to be co-signors, even if they don’t live in the property.
- “Border income” is money received from a roommate and it can help you qualify.
Lower Borrower Contribution
HomeReady mortgages have a lower down payment requirement. They also allow funding your upfront mortgage costs with help from other sources. Fannie Mae allows you to contribute as little as 3% down on a single-family unit. This is a lower down payment compared to an FHA loan, which is usually 3.5 percent.
More Affordable Mortgage Insurance Premiums
HomeReady loans are much more affordable when it comes to monthly insurance premiums. Compared to other programs such as FHA loans, HomeReady loans help you minimize and eventually eliminate mortgage insurance premiums.
Like other conventional mortgage loans, HomeReady loans will allow the option of eliminating mortgage insurance once you build up enough equity. These types of loans work great when you’re looking to reduce your down payment requirement without sacrificing your ability to reduce mortgage insurance costs.
Flexible Approval Process
Most lenders follow an approval process based only on the borrower’s income. But for HomeReady loans, Fannie Mae allows non-occupant co-borrowers to add their financial support to the process. For example, even if your parents don’t plan to live in the property, they can be listed as co-borrowers to help you secure the mortgage approval.
This is not exclusive to family members. Even roommates who can prove they have been with you for at least one year can serve as co-borrowers.
Requirements for a HomeReady Mortgage
You don’t have to be a first-time homebuyer to qualify to buy a home in Florida with a HomeReady loan.
However, there are other requirements you will need to fulfill:
- Have an income of less than or equal to the area median income (AMI). The AMI of a particular address is determined according to the U.S. Census tracts, accessible on Fannie Mae’s website. Borrowers in low-income areas may not have to consider any income limits at all.
- Have a minimum credit score of 620. There are exceptions for borrowers who do not have a credit history. The program allows you to use non-traditional tradelines to establish credit history, including utility bills, monthly accounts such as gym memberships and others.
- Complete homeownership education. These courses prepare borrowers for sustainable homeownership. At least one borrower on each HomeReady purchase transaction must complete the Framework online education program.
Income Limits Set by Geographical Areas
In underserved areas, there are no income limits for a HomeReady mortgage.
More economically strong areas have income limits set by Fannie Mae for HomeReady applicants. This ensures the program is used by those who need it the most.
Summary of income limits:
- Properties in low-income census tracts: no income limit.
- Properties in high-minority areas and designated disaster areas: 100% of the area’s median income.
- Properties in any other area: 100% of the area’s median income.
Fannie Mae has published HomeReady eligibility maps for each state that detail each geographical area.
Your loan officer will confirm the eligibility of the exact property address.
HomeReady Property Eligibility
The HomeReady mortgage program only applies to owner-occupied properties. You can purchase a multi-unit property, but you must reside in one of the units. Investment properties, vacation homes, or second homes are not eligible for this program.
Where Can I Find a HomeReady Mortgage?
Families and individuals are finding this program much easier to qualify for than other programs. The program works well for first-time as well as repeat homebuyers. Fannie Mae has approved lenders that offer the program.
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