Traditionally, getting a mortgage requires you to have a level of income appropriate to the size of home that you're buying. But for a lot of low-income borrowers, a simple measure of one person's income isn't an accurate measure of whether or not that person can afford a home.
Now, with the HomeReady mortgage from Fannie Mae, multigenerational and extended households can have easy access to mortgage funds. How does the HomeReady mortgage work? Here's what you need to know.
Flexible Down Payment Requirements Make Home Ownership More Accessible
Traditional mortgages require you to pay 20% of the home price upfront in the form of a down payment, or 5% if you pay for Private Mortgage Insurance. And although 5% is a small down payment, it's still a significant sum of money for a lot of low-income borrowers. But now, with the HomeReady mortgage, qualified borrowers can access financing with as little as 3% down, making it easier to become a homeowner.
Non-Borrower Household Income Is Now Counted As Income
Another big change that the HomeReady mortgage introduces is that lenders may now count all household income when determining affordability criteria (but not qualifying income). There's no minimum requirement for funds to come directly from the primary borrower, which means that non-borrower members of the household can have their income counted when determining whether a mortgage is affordable. It's also possible to use non-occupant borrower income – for instance, the income of a borrower's parent – to be counted as income.
For extended and multigenerational households, this means mortgages are much more affordable as all household income can now be counted as eligible.
Eligibility Requirements: Who Can Qualify For A HomeReady Mortgage?
HomeReady mortgages come with certain eligibility criteria attached that homeowners will need to meet. In order to be eligible, a household must be below a certain percentage level of the area median income (AMI) – that is, a household must fall somewhere in the lower half of their area's income scale.
For properties that are located in "low-income census tracts", there is no income limit. For properties in high-minority areas and designated disaster areas, borrowers who earn at or below 100% of the AMI can access HomeReady financing. And in all other census areas, borrowers can access financing if their annual household income is no greater than 80% of AMI.
The new HomeReady mortgage from Fannie Mae can make it easier for certain households to qualify for mortgages. Your Fidelity Bank mortgage lender can help you to understand how the program works. For more information, call your Fidelity Bank mortgage professional today or visit: https://www.fanniemae.com/singlefamily/homeready.
*Subject to credit approval criteria and other program guidelines.