What are the HomeReady Minimum Requirements?

HomeReady and HomePossible are best known for being loan programs that allow eligible borrowers to qualify for the lowest down payment of any loan program, making it a game-changer for buyers. But did you know many of HomeReady’s minimum requirements are much easier to meet than those of a conventional loan, and some are even easier to meet than HomePossible’s? If you’ve faced challenges in getting approved for a mortgage, it’s time to meet HomeReady. 

What is HomeReady? 

HomeReady is an affordable conventional loan offered by Fannie Mae. By conventional, that means it is neither government-sponsored nor a jumbo loan. Being an affordable loan program, it has more lenient requirements than a standard conventional mortgage. 

Eligibility

Before the program starts seeming too good to be true, there is one caveat. HomeReady is designed to give a helping hand to borrowers who need it the most in the face of rising home prices. Therefore, there is an income limit. Only borrowers earning 80% of the area median income or less are eligible. In the majority of the Chicago area, a max income of $94,080 meets the HomeReady minimum requirement. In the Nashville area, the limit is a little bit lower at $89,760. To see what the income limit is in your area, use Fannie Mae’s area median income lookup tool.  

HomeReady Minimum Down Payment: 3%

As mentioned in the introduction, the 3% down payment requirement for HomeReady and HomePossible is the lowest of all conventional loan programs. But if you are an active or former service member or are looking to purchase a home in a rural area, you could be eligible for a $0 down payment on a VA or USDA Loan. 

HomeReady vs. FHA Down Payment

FHA loans are also known for having a low down payment requirement of 3.5%. So, when should you choose a HomeReady Loan over an FHA Loan? 

FHA Loans are government-sponsored loans that have no income limitation and, in some areas, offer more flexible requirements than conventional programs. So, if your income is over the HomeReady limit, you may consider an FHA Loan. Your mortgage banker will look at your credit, income, and debts to help determine whether you should opt for the leniency that comes with an FHA Loan. Keep in mind that FHA Loans are more expensive than conventional loans, so if you are looking for a low down payment and qualify for HomeReady, it’s probably the way to go. 

HomeReady Minimum Credit Score: 620

Unlike most conventional loans that require a credit score of 680 or more, and HomePossible’s credit requirement of 660, HomeReady’s minimum credit requirement is only 620. This opens the program up to many first-time buyers who are still building their credit. Speaking of, HomeReady provides flexibility for borrowers who fall below the 620 minimum due to an insufficient credit history to potentially still qualify through other methods. 

HomeReady vs. FHA Credit Score

FHA Loans are a common go-to for those with lower credit scores, which is still a great idea. But it can be challenging when a buyer is shopping for condos and townhomes. Keep in mind that HomeReady is a conventional loan, just like any other, in the eyes of an HOA, allowing you to bypass FHA restrictions. In short, the program opens doors for both buyers and inventory. 

HomeReady Minimum Reserves: 0 Months 

If you’re unfamiliar with the term, reserves are the number of months’ worth of mortgage payments you have in the bank. For example, if you are applying for a conventional loan that requires 2 months’ reserves and the mortgage payment is $2,000, you would need to have $4,000 in the bank (in addition to the amount needed for closing) in order to qualify. 

For many first-time buyers, a lack of savings is a daunting obstacle. HomeReady not only provides the potential to qualify with 0 months’ reserves, but the entire down payment can also be gifted. It’s a great way to both get started as a homeowner and build financial stability.

Learn More About Minimum Requirements

In this article, we mentioned more programs than just HomeReady. That is because there are so many options with flexible minimum requirements out there! If qualifying for a conventional loan has brought up some challenges, talk to a mortgage banker about the alternatives available to you.