Fannie Mae HomeReady®
A Low Down Payment Alternative to FHA Financing
Fannie Mae has put together a program that takes FHA, and its first time homebuyer program, head on. In what has become a viable alternative to government insured low down payment programs, Fannie Mae’s HomeReady® mortgage program has made a big splash.
Here is what Fannie Mae’s HomeReady® has to offer:
Features of Fannie Mae’s HomeReady® Program
- Financing up to 97% loan-to-value (LTV) for purchase (or refinance) of one-unit principal residences
- Borrower is not required to be a first-time buyer
- Cancellable mortgage insurance (restrictions apply); lower MI coverage (25% for LTVs >90% to 97%) compared with standard requirements of 35% resulting in more affordable monthly payments
- Gifts, Grants, Community Seconds, and Cash-on-hand permitted as a source of funds for downpayment and closing costs
- Innovative underwriting flexibilities expand access to credit responsibly. Flexibilities include: 1)Rental unit and boarder income and 2)Non-occupant borrowers, such as a parent
- Available in all markets subject to income limits for properties in non-low income census tracts. Refer to Fannie Mae’s Income Eligibility Tool.
So, based on the features of Fannie Mae’s HomeReady® Program you can see there is value but let’s get to the meat of the program . . . What’s in it for a homebuyer.
Homebuyer Benefits Using Fannie Mae’s HomeReady® Program
- Low down payment --as low as 3% down payment for home purchase transactions.
- Flexible sources of funds can be used for the down payment and closing costs with no minimum contribution required from the borrower’s own funds (1-unit).
- Affordable and cancellable monthly mortgage insurance.
- Reduced MI coverage requirement above 90% LTV; This is huge as mortgage insurance can be one more expensive parts of a payment for home buyers with limited funds for a down payment
- Cancellable Mortgage Insurance. This is a big difference to government insured loans like FHA. Once the property meets LTV limits set by the Homeowners Protection Act of 1997, the mortgage insurance can be cancelled and removed. An FHA loan will never have the mortgage insurance cancelled. This is a huge savings over the life of the loan.
- Homeownership education through the online Framework® course prepares borrowers for sustainable homeownership; other education and housing counseling options are available. Studies have shown that homebuyer education reduces future defaults. Requiring homebuyer education is a plus for everyone.
For homebuyers looking to buy in Michigan with limited funds for a down payment, click on the link below for a FREE Mortgage Preapproval. You can find out your eligibility for the HomeReady program, and others, in just a few minutes with our Mortgage in a SNAP. So what do you have to lose? Stop renting and gain homeownership in Michigan while home affordability is still in favor of the buyer over the renter.