Fannie Mae’s HomeReady Program

Fannie Mae (FNMA/OTC) has introduced HomeReady™ mortgage. This program is aimed to allow low and moderate income individuals access to an affordable, sustainable mortgage. While this program is not yet available, Fannie Mae will provide additional details to lenders in the coming weeks through a Selling Guide announcement.

Lenders who use Desktop Underwriter® will be automatically advised of potentially eligible loans and fully leverage Fannie Mae’s integrated suite of risk management tools for greater certainty and efficiency.  HomeReady will replace Fannie Mae’s MyCommunityMortgage®. HomeReady reflects extensive research and lender input.

“HomeReady will help qualified borrowers access the benefits of homeownership with competitive pricing and sustainable monthly payments,” said Jonathan Lawless, Vice President for Underwriting and Pricing Analytics at Fannie Mae. “We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market.  The combination of our risk management safeguards and an innovative online education tool will put HomeReady borrowers in a strong position to succeed in homeownership.

Fannie Mae has new guidelines that make its pricing favorable and simplified for the lenders’ use. It also eliminates or caps standard loan level price adjustments. In order to qualify for the loan, borrowers will be required to complete an online education course preparing them for the home buying process. This will also provide them with post-purchase support for sustainable home ownership. The  Housing Partnership Network and the Minnesota Homeownership Center will provide the education course. The course called Framework meets the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling. The course costs $75.

A new feature is that now income from a non-borrower household member can be considered to determine an applicable debt-to-income ratio for the loan. This helps multi-generational and extended households qualify for an affordable mortgage. According to Fannie Mae’s research these extended households tend to have incomes that are as stable or more stable than other households at similar income levels, well positioning them for home ownership. Additionally, HomeReady allows income from non-occupant borrowers, such as parents, and rental payments, such as from a basement apartment, to augment the borrower’s qualifying income. Another feature is that first-time and repeat home buyers can purchase a home using HomeReady with a down payment of as little as three percent (3%).

Desktop Underwriter will include HomeReady guidelines provided by Fannie Mae.  Fannie Mae anticipates accepting loan deliveries under the HomeReady guidelines in late 2015.

Borrowers at any income level with properties in designated low-income census tracts, and to borrowers at or below 100% of area median income (AMI) for properties in high-minority census tracts or designated natural disaster areas will have the availability of HomeReady. For any properties in the remaining census tracts, HomeReady borrowers must have an income at or below 80% of AMI. Approximately 50% of the census tracts will be subject to the 100% AMI limit or have no income limit.

To find income guidelines visit Fannie Mae’s website to see the maps. Desktop Underwriter will make the AMI eligibility determinations when the lender submits the loan file. Lenders will be provided with online tools to assist them in determining specific income guidelines for HomeReady in their areas. These tools will be provided by Fannie Mae later this year. Also, lenders will receive additional details in the coming weeks through a Selling Guide announcement.

A word of warning, just because you qualify for the loan and are able to put down the three percent does not mean you should encumber yourselves with a home loan. Remember, the less you put down, the more you will pay in interest over the life of the loan. Be prudent with your money decisions, as it really is the Lord’s money.

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