Finding the right mortgage to finance your home is one of the most important decisions you’ll have to make when buying a house. For those unable to commit to the standard 20% down payment, there are two notable mortgages available through government-sponsored enterprises Fannie Mae or Freddie Mac that make lower down payments possible: HomeReady and Home Possible. These options provide expanded access to credit while supporting sustainable homeownership.
Many new homebuyers out there don’t know about HomeReady Mortgage. The Fannie Mae HomeReady Mortgage is designed for home buyers who don’t fall into typical lending approval guidelines. If you have a low down payment, need to use income from a household member who’s not on the loan, need to have a co-signer, or need to use income from renting out a room in the home you’re buying, the HomeReady mortgage might be right for you.
Your income isn’t capped when buying a property in a low-income area. Your income will be capped at 100 percent of area median income when buying a property in an area where the minority population is at least 30 percent, or where the federal government has designated a disaster area. And in areas other than these, your income will be capped below those areas’ median income levels to leave room for those who need the program the most.
The Fannie Mae program allows the first-time home borrower 3%-5% down and there are cheaper mortgage insurance and fees than FHA. Requirements include:
- A minimum credit score of 620 or higher.
- A Median Income Tool Lookup to determine income qualification for the ZIP code of the home to be purchased.
- Completing homebuyer education requirements – this training offers an easy-to-use, online course.
For the down payment, buyers can use gift funds or cash on hand if buying a one-unit property, and none of the funds have to come from you. The eligibility of cash as a source of down payment is rare in lending guidelines, and one of the great benefits of this loan.
With a Home Possible loan, you need as little as 3 percent down, although your income cannot exceed 80 percent of the area median income in the ZIP code where you want to purchase a home. Remember, with these options, you will have competitive payments, lower mortgage insurance coverage and gifts and grants are allowed!
Learn more about how first-time home buyers can prepare. Be sure to discuss your options with one of Core Bank’s team of lenders. We are committed to helping you achieve your dreams, whether you’re ready to buy, build, or refinance your home.