This July, the HomeReady program will broaden its income requirements even more, making the idea of homeownership possible for low to moderate income buyers.
What is HomeReady?
HomeReady® offers low down payments, and flexible sources of funds for buyers, making it a good option for first time home buyers, or anyone who needs expanded options to make owning a home possible.
The program can also be used for a refinance, allowing up to 95% loan-to-value (LTV) in some cases.
What Does It Mean for You?
It can be hard to make sense of all the benefits the program offers, so here are the key ones you need to know:
- Up to 97% loan to value financing for home purchases.
- Funds can be used for down payment and closing cost with minimal contribution from the borrower.
- Affordable monthly mortgage insurance that may be eligible for cancellation.
- No income requirement for homes in low income areas, and average median income requirement for all other properties.
- Income of extended family or roommates that will be living in the home can be considered to help the borrower qualify.
- A close relative or significant other co-borrower can join the borrower on the mortgage, even if they don’t live in the home.
- Borrowers may retain ownership of other properties if income qualifications are met.
These benefits make it easier for buyers, who haven’t been able to previously access home financing, to buy a home.
The flexibilities in funds, with options for help from friends and family, can make the difference between renting and owning for many creditworthy borrowers.
Calculating Area Median Income
Established by the U.S. Department of Housing and Urban Development, AMI estimates are used as the basis for income limits to determine a borrower’s eligibility for HomeReady® mortgages.
HomeReady Income Limits
To be eligible for a HomeReady loan, a borrowers’ total annual qualifying income may not exceed 100% of the area median income (AMI) for the property’s location and there is no income limit for properties located in low-income census tracts (those where the median income is not greater than 80% AMI). Fannie Mae believes that to better align with its housing goals, they are changing the income limit requirements for all HomeReady loans to not exceed 80% AMI for the property’s location. (This includes properties in low-income census tracts.)
Effective Dates
- All the above changes will apply to new loan casefiles submitted to DU the weekend of July 20, 2019.
- The new limits and the 80% AMI change will apply to manually underwritten loans with application dates on or after July 20, 2019.
Bottom Line
HomeReady is a great alternative to FHA, but with changing guidelines in mid-July, it’s going to get harder for buyers to qualify for and you must be at 80% of the AMI and the AUS approvals. If you are looking for a low-down payment of 3%, then acting now maybe a better course than waiting until July.
Resources
Tools are available to help you find the area median income for the property you’re interested in. The Fannie Mae website has an AMI tool for each state, and HomeReady® also has a look-up tool on their site. Just enter an address in the search tool and a map will show the area and the income limit for that area.
For more info on HomeReady®, visit the Fannie Mae website or contact me at 303-779-0591.
