The HomeReady mortgage is a conventional loan from Fannie Mae with an income test. Section B5-6-01 of the Selling Guide spells it out.
What the loan is
A HomeReady mortgage is a first mortgage, purchase money, or limited cash-out refinance transaction for one- to four-unit properties used as the borrower’s principal residence. It’s a standard product available to all Fannie Mae lenders, and no special approvals are required.
The income limit
To be eligible, the total annual qualifying income may not exceed 80% of the area median income (AMI) for the property’s location. The lender must count the income from all borrowers who will sign the note, to the extent it’s considered in evaluating creditworthiness for the loan.
Which AMI figures count
Lenders have to use the AMIs that Fannie Mae uses in Desktop Underwriter or on its website, and can’t rely on other published versions, such as AMIs posted on huduser.org.
Education and the top loan-to-value tier
Homeownership education is required for HomeReady purchase loans when all occupying borrowers are first-time homebuyers. For loans with loan-to-value, CLTV or HCLTV ratios of 95.01 to 97%, the guide adds requirements, including fixed-rate loans with terms up to 30 years. High-balance and ARM loans aren’t allowed, and it’s Desktop Underwriter only.
Questions
Common questions
What is the HomeReady income limit?
Fannie Mae's Selling Guide B5-6-01 says total annual qualifying income may not exceed 80% of the area median income for the property's location.
Whose income counts toward the HomeReady limit?
The lender must count the income from all borrowers who will sign the note, to the extent that it is considered in evaluating creditworthiness for the loan.
Is education required for a HomeReady loan?
Homeownership education is required for HomeReady purchase loans when all occupying borrowers are first-time homebuyers.
Written by Diana Yeji Kim — REALTOR® at eXp Realty, serving Greater Boston in English, Korean, and Japanese.
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