- The program allows first-time and repeat buyers
- Its minimum down payment is just 3 percent
You’ll have to pay mortgage insurance premiums, but they are usually less expensive than those of comparable FHA home loans.
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The HomeReady 3% down mortgage from Fannie Mae
For buyers looking for a low-downpayment mortgage option that’s not backed by the FHA, Fannie Mae has the HomeReady ™.
HomeReady™ applies to certain low-income census tracts; and areas with high minority concentrations.
The Conventional HomeReady™ is meant to help homebuyers who might qualify for a loan but lack the resources to make a five percent down payment or more.
Low-down-payment and no-down-payment mortgage options
Fannie Mae and Freddie Mac join the FHA, VA, and USDA in offering low-downpayment loans to buyers nationwide.
HomeReady’s aggressive terms have helped it to grab market share from the FHA loan, which is another low-downpayment option available in today’s market.
The FHA loan has its place, though.
FHA loans require down payments of 3.5 percent and home buyers with less-than-perfect credit may find FHA loans to be more cost-effective than Home Ready. Especially because FHA mortgage rates are typically 25 basis points (0.25 percent) below rates for a comparable conventional loan.
Borrowers with better-than-average credit scores, though, typically save by using the Fannie Mae HomeReady 3% loan.
HomeReady Mortgage eligibility Q&A
1) Can first-time buyers use HomeReady program to purchase a home?
2) What is the definition of a “first-time homebuyer”?
For most programs, you’re a first-time homebuyer if you have not owned a primary residence within the last three years. There are other exceptions to this rule for those with homes that can’t be repaired to livable standards, those with mobile homes (personal property) and others.
3) Are down payments larger than 3 percent allowed with the program?
Yes, there is no limit to the size of your down payment with the Home Ready. With a down payment of five percent or more, though, you will no longer be using the Conventional 97.
4) Is the low-downpayment mortgage program via Fannie Mae and Freddie Mac better than an FHA loan?
There is no “best” low-downpayment mortgage program. What’s best for one home buyer may not be what’s best for another. Each program has its benefits.
5) What mortgage products are available via the Home Ready mortgage program?
The Conventional mortgage programs allows mortgage applicants to use the 30-year fixed-rate mortgage only. You can’t use it for 15-year fixed loans or ARM products.
6) Can I use an adjustable-rate mortgage (ARM) with the Home Ready?
No, the Conventional 97 allows mortgage applicants to use 30-year fixed-rate mortgages only.
7) What is the loan limit on the 3 percent down program through Fannie Mae and Freddie Mac?
The 3 percent down payment program is limited to conforming loan sizes or less. Loans in high-cost areas are permitted, but loan sizes remain capped at local conforming loan limits.
8) What is the maximum number of units for a home under the 3 percent down payment program?
The 3 percent down-payment program is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and townhomes. This means you can’t use the program for duplexes, tri-plexes or four-plexes.
9) Are vacation homes eligible under the Home Ready?
No, the 3 percent down payment program is for primary residences only. You’ll need a standard conventional loan for vacation and second homes.
10) Can I use the Home Ready for investment properties?
No, the 3 percent down-payment program is for primary homes only. You can’t finance a rental or investment property with this product.
11) Does the Home Ready mortgage program require home buyers to attend home-buyer counseling?
Yes, there is a home-buyer counseling requirement for Home Ready.