HomeReady, the mortgage option that allows borrowers to qualify with income from non-borrower household members, is getting an upgrade.
That’s according to government-sponsored mortgage titan Fannie Mae, who announced the following features in a release on Tuesday, the day the changes went into effect. Among them, occupant borrowers on a HomeReady loan can own other residential properties, and there will no longer be a requirement for homeownership education for limited cash-out refinance transactions.
Beyond that, Fannie Mae increased income limits to 100% of area median income in all areas, except low income market tracts that have no limit, which is intended to make it easier for lenders to determine a borrower’s eligibility. It will do away with the requirement for landlord education for HomeReady loans secured by two-, three- or four-unit properties. (Homeownership education will still be required, however.) Also, borrowers will be able to meet the homeownership education requirement by getting one-on-one assistance from a HUD-approved nonprofit counseling agency, which can help them understand the home buying process and responsibilities that come with homeownership, such as making a mortgage payment on time.
How HomeReady Works
Targeting borrowers in areas the U.S. Census Bureau deemed as low-income, Fannie Mae launched the HomeReady program in fall 2015. The loan was notable for the fact that it factors non-borrower household members’ incomes into applicants’ eligibility. Applications can include borrowers who aren’t currently living in the home, such as parents, as well as rental income the borrower may earn from renting a basement apartment, for instance. HomeReady also helps qualified borrowers purchase a home with a down payment of as little as 3% down.
Things to Remember
As with any mortgage application, it’s important to know where your credit stands so you have some sort of idea what type of terms and conditions you may qualify for. After all, your credit score is one of the biggest factors used to determine if you qualify for home loan financing and what your rates and fees will look like. You can view your two free credit scores, which are updated each month, on Credit.com.