Buying a home is difficult for many Americans right now, due in part to record-high home prices and rates well over 6%. But for those who are earning less than most people in their area, it can feel out of reach.
The HomeReady loan can help clear a pathway to homeownership for this cohort.
This product, backed by the federally insured mortgage holder Fannie Mae and offered by private lenders, is specifically designed for Americans who are considered low-income — or make 80% of the area median income (AMI), as defined by the Department of Housing and Urban Development — who may not otherwise qualify for a traditional mortgage.
Borrowers who take out this loan need to put 3% down upfront and can typically get a lower rate than they would on a conventional loan. People who earn 50% of the AMI or less can qualify for a $2,500 closing credit that can be put toward closing costs or a down payment — the credit is funded and offered by Fannie Mae and is available to everyone regardless of lender.
Additionally, the cost of private mortgage insurance is typically less than with other types of mortgages and you can close in less time than with other loans, according to Fannie Mae. You can see if your income qualifies you for a HomeReady loan on Fannie Mae's website.
- Maximum income: Annual salary can't surpass 80% of the area median income
- Minimum credit score: 620
- Minimum down payment: 3%
- Maximum debt-to-income ratio: 50%; lower in some cases
- Additional requirements: HomeReady borrowers must take a homeownership course with Fannie Mae
However, not all lenders offer this product. If a HomeReady loan seems like it may be a good fit for you, here are places you can start your search.
If you like managing your finances online, Rocket Mortgage is a great option. It has an easy-to-use website and app, and has consistently received top ratings from institutions like the Better Business Bureau and J.D. Power.
In addition to offering the HomeReady mortgage, Rocket also has its own proprietary loan for those who earn less than 80% AMI called ONE+ by Rocket Mortgage. With this home loan, Rocket will provide borrowers who put 1% to 2.99% down with an additional 2%, bringing the total to 5%.
Rocket Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages are available.
Types of loans
Conventional loans, FHA loans, VA loans, Jumbo loans, low-down-payment mortgages
Terms
10-, 15- and 30-year fixed-term conventional loans, 30-year VA and FHA loans, custom mortgages with fixed-rate terms from 8 to 29 years.
Credit needed
620 for conventional loans
Minimum down payment
0% for VA, 1% for RocketONE+, 3% for conventional, 3.5% for FHA, 10% to 15% for jumbo
Read our review of Rocket Mortgage
If you're looking for a HomeReady loan but you prefer to manage your mortgage in person, Fairway may be appealing — it has more than 700 branches throughout the country. Additionally, it provides up to $7,000 for qualifying first-time homebuyers to use toward a down payment and closing costs.
Fairway Independent Mortgage Corporation
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, physician loans, renovation loans, jumbo loans
Terms
10-, 15-, 20-, 25-, 30-year terms available for fixed-rate loans; 5-, 7-, or 10-year introductory period for ARM loans
Credit needed
580 for FHA loans, 620 for conventional loans
Minimum down payment
3% if moving forward with conventional; 0% if moving forward with USDA
If you are a veteran, consider USAA. It focuses on those who are serving or who have served in the military. In addition to HomeReady loans, it's also among our top picks for VA loan lenders. A USAA representative can help you decide whether a VA loan or a HomeReady loan is right for you.
- Boasts lower-than-average rates, making it a great option for those with prioritizing affordability
- Available in all 50 states
- Geared towards members of the military, so veterans and service members can be certain USAA's team will know how to help them get the best financing option for them.
- Does not offer FHA loans
- Does not offer USDA loans
- Does not offer home equity loans or home equity lines of credit
- Only veterans, servicemembers and some others can join bank.
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