First time home buyers are often faced with home ownership hurdles. These obstacles include down payment, student loan debt, credit scores, debt ratios, and affordability. Our Fannie Mae HomeReady mortgage helps buyers overcome and succeed as a new homeowner. Here is an interesting fact stated by Fannie Mae: “Nearly half (48.9%) of all single-family owner-occupied home purchase loans financed by Fannie Mae in 2017 were to first time home buyers.” Even though HomeReady is key for first time home buyers, other primary residence buyers may qualify!
This Fannie Mae home loan falls under the conforming loan products category. HomeReady was created to provide buyers with an alternative to FHA. It is also kind of like the twin sister product of Freddie Mac’s Home Possible. Notice a common comparison between the two mortgages in the attached chart. We mentioned common hurdles above, so let’s further discuss the benefits for this home loan.
- 640 credit score
- 3% down payment
- First time home buyer or repeat buyer
- Lower cost mortgage insurance (PMI)
- Cancellable mortgage insurance
- Higher loan amounts than FHA
- May use with approved condos
- Available for self-employed buyers
HomeReady Mortgage Insurance Benefits
Affordability is a vital goal of this product. Besides offering a great interest rate, it provides a lower than normal mortgage insurance premium. Mortgage insurance allows lenders to offer lower down payment mortgage loans. As a benefit for first time home buyers and repeat home buyers, the mortgage insurance premium has been reduced. It is cheaper than the traditional mortgage insurance for a 5% down purchase.
HomeReady Income Limits
Just like many other affordable housing loans, there are potential income limits. Rather than using household income limits, this Fannie product only uses the borrower income. This creates an advantage over USDA when there is extra non-borrower household income. In looking at the Home Ready income limits, buyers find they are quite liberal.
Although Fannie Mae created HomeReady for low to moderate income borrowers, there are areas available for high income borrowers. Some areas have no income limit. Recently, we closed a purchase in Raleigh NC with a $440,000 price. Plus, the buyer made a significantly higher income than the standard limits. How? The property was located in an area with no income limits. Check out the chart of San Antonio, TX where the green areas have no income limits.
Just because a buyer makes a higher income, do not exclude the benefits of this loan. Even buyers with 5% or more down payment could find more advantages in this conforming 97% option. Not sure if you fit? Give us a call, and we will check your qualifications.
Fannie Mae Student Loan Guidelines
With the Federal Reserve stating that outstanding student loan balances are crossing the $1.5 trillion level in the first quarter of 2018, it is one of the major issues keeping buyers on the sidelines. Especially first time home buyers, which causes them to rent or live with family. However, there are great solutions for hopeful buyers, and this is one of them!
Since HomeReady is a Fannie Mae home loan, it provides one of the more recent upgrades for borrowers. Buyers with student loan debt may qualify easier for a home loan. If someone has student loan debt, the term Income-Based Repayment (IBR) is a familiar term. It allows borrowers to pay a much reduced minimum payment on their student loan balances. Buyers with student loan debt often run across qualifying issues. Lenders count 1% of the student loan balances as a payment rather than the lower IBR payment. That may cause a problem with FHA or USDA home loans since they use 1%. 1% of a $100,000 student loan balance is $1,000!
Luckily, with HomeReady and other Fannie Mae products, the actual income-based repayment amount is used to qualify for a new home loan. If the buyer’s student loan balance is $100,000 and the minimum required payment is $0, then $0 is used in the buyer’s debt to income ratio! That is going to make it a lot easier to qualify for a home! Keep in mind, this only applies to IBR payments. If the student loan payment is $0 because payments are deferred, that is different.
Which Low Down Payment Loan is Best for You?
By now, this house to sound pretty good and it should! There are several other options OVM Financial offers with low to no down payment and flexibility for today’s home buyer.
- USDA No Money Down
- VA No Money Down
- VA Jumbo Loan
- FHA 3.5% Down
- Down Payment Assistance*
- Down Payment Grants*
- Home Possible 3% Down
- Renovation Loans
*Down payment assistance or grants must be used in conjunction with OVM Financial first mortgage products.
Contact OVM Financial now to get the conversation started. We look forward to developing a mortgage strategy to fit your goals!