HomeReady® loans

The HomeReady® home loan is Fannie Mae’s mortgage program for low- or moderate-income consumers with a low down payment. All you need is 3% down to get through the door of your new home. That 3% down payment is a huge weight off your shoulders compared to the 20% most loans require. HomeReady® loans also let you mix and match where that cash comes from. Rather than your own wallet, you can pull from gifts and grants.

You’ll still need to budget for private mortgage insurance because of the lower down payment. The good thing is it won’t last forever. Once you hit 20% equity, you can ask for mortgage insurance to be taken off the bill. To put HomeReady® into motion, you may need to take a homeownership education or housing counseling course to be eligible for the program. This resource is there to make sure you’re all caught up on the tools you need to be a savvy homeowner.

If you’ve dipped a toe in the mortgage world, you’ve probably heard of the creator of HomeReady®, Fannie Mae. Fannie Mae is a government-sponsored entity that works in the secondary mortgage market and helps set guide rails for the industry. This means Fannie Mae doesn't directly lend money to home buyers but instead buys and guarantees payments through lenders. This system keeps the mortgage world moving and frees up funds so lenders can keep giving loans to hopeful home buyers like you.

The guarantee fee

Fannie Mae and Freddie Mac are government sponsored entities that promise to cover the principal and interest on their mortgage-backed securities and, for this service, they charge what's called a guarantee fee, or g-fee for short.

We’ve covered the basics, but there’s a few HomeReady® loan guidelines you should know. First, you may need a credit score of at least 620. Alongside your credit score, a lender will look at your debt-to-income ratio. This percentage shows how much of your monthly income goes towards paying off debt. HomeReady® is more flexible than other loans and could accept up to a 50% DTI ratio—but the lower, the better. A lower figure shows lenders that you're in a healthy spot financially because you're not using a lot of your income to pay debts.

If HomeReady® is sounding pretty good to you, make sure you check all the boxes of a qualified borrower. Here’s a quick summary of the major marks you would want to hit.

• Credit score of 620+
• Debt-to-income ratio of 50% or less
• Income at or below 80% of the area median income
• Minimum down payment of 3% for qualifying properties which can come from gifts, grants and programs
• Must be your primary residence
• Required private mortgage insurance
• Homeownership education or housing counseling course (in some cases)

HomeReady loans are a good choice if you:

• Don’t have perfect credit
• Can afford a 3% down payment
• Earn 80% or less of the area median income where the home is located

Ready to get started?

Before you decide which way to go, let’s take a look at what else may be available.

FHA Loans

The Federal Housing Administration (FHA) offers a low down payment loan, with down payments of 3.5% or more alongside the need for mortgage insurance. FHA also requires a credit score of 580 or higher.

VA Loans

If you are a veteran, a Veterans Affairs (VA) loan could be an option for you. These programs are available to veterans, service members and eligible surviving spouses and offer a 0% down payment, if you have 100% of VA Loan Guarantee Benefit, with no private mortgage insurance required. They also offer competitive interest rates. VA loans typically look for credit scores of 620 and a DTI ratio of 41%.

Citi HomeRun® mortgage

Citi has a special low-down payment program, a great option that helps you put as little as 3% down with no private mortgage insurance. HomeRun also permits gift and grant funds to cover the down payment after the first 1%. This program is only offered in select markets and income limitations may apply.

Have questions? Our team can help!