Extended families or friends who live together and all contribute to the household income have had a challenge when trying to buy a home. One person might not have a credit score (or a too-low score). Or, they might not be able to document the down payment money.
For these good folks, the new HomeReady loan program comes to the rescue!
The HomeReady loan allows a non-borrowing person’s income to be considered. As long as this person lives in the home, his or her additional income allows the borrower to be approved with a higher debt-to-income ratio. (Up to 50% DTI) The non-borrower does not have a credit check at all.
This is not subprime lending. This is Fannie Mae recognizing that multi-generational families are stable and historically make their payments on time. HomeReady honors family tradition by making home ownership more attainable.
Facts About the HomeReady Loan Program
- Down payment required is 3% of the purchase price. The down payment can be a gift, grant, come from a down payment assistance program, or be your own funds.
- You get a lower monthly mortgage insurance fee than with the FHA or traditional conventional loan.
- Income restrictions apply. Depending on the neighborhood of the property, your income can be 80% to 100% of the area’s median income. (Your loan officer can provide figures for your area.)
- The non-borrowing person does not have to be a blood relative. He or she can be a friend who will be living in the home for at least 12 months after purchase.
- The non-borrower’s income must be at least a 30% contribution. This is to ensure that his or her income is sufficient to help out in case of financial hardship or emergency. More than one non-borrower can be used to meet that 30%. For example, you can use both grandma’s and a brother’s incomes to add up to the 30%.
- You can be a first-time home buyer or a repeat home buyer.
- You cannot own rental properties. This is not a program for investors to amass a portfolio of properties.
- You can buy a condo or a house with 3% down. Manufactured home with 5% down.
- Minimum credit score is 620 (middle of three credit scores).
- At least one borrower must take an online class about responsible home ownership. Fannie Mae’s fee for the class is $75.
Please help get the word out by sharing on Facebook and Twitter, because home ownership is a wonderful thing.
Need more information?
For other rules and guidelines, see your loan officer. If you are in Washington or California, I would love to help you. I am state licensed, NMLS 1284134. I work for Envoy Mortgage, a full service mortgage lender.