Fannie Mae is on a mission to make home buying easier.
With its new HomeReady mortgage, the giant mortgage backer looks to help first time home buyers and repeat buyers alike.
This new mortgage program is laser-focused on helping minorities, Millennials, and mixed families on their road to homeownership.
Here are few of the highlights of the HomeReady Mortgage program:
Income limits are set by geographical areas. In underserved areas, there are no income limits. In more economically developed areas, Fannie Mae has limited the amount of money HomeReady applicants can make. This policy ensures the program is reserved for the ones who need it most. The following is a breakdown of income limits.
Applicants don’t need perfect credit to qualify.
In fact, FICO scores down to 620 could be approved.
A credit score of at least 680, though, will yield the best rates. Fannie Mae waives some upward rate adjustments for borrowers with a 680+ score.
That means higher credit borrowers can receive a better rate for a 3% down loan than would 20%-down borrowers.
Be aware that lenders often impose “overlays” — tighter standards than Fannie Mae itself mandates. If your lender requires higher credit scores than those mentioned above, shop around to find a more lenient mortgage provider.
Fannie Mae has reduced the amount of required mortgage insurance coverage. This translates to lower cost for the borrower.
Private mortgage insurance (PMI) would cost around $230 per month on a typical 3% down loan of $250,000, according to MGIC’s Rate Finder.
Under the HomeReady program, PMI is just $160 per month. The $70-per-month savings allows HomeReady buyers to afford more home for the same amount of money.
All buyers who use the program must complete home buyer education. The course is provided online and can be done according to the individual’s own pace and schedule.
There is a small fee of $75 for the education – a small price to pay for the flexibility of the program.
New homeowners benefit greatly from pre-purchase education. It’s hard to know all the ins and outs of homeownership by researching on your own. Going through formal training is a great idea for first time home buyers whether or not they use the HomeReady program.
Fannie Mae formed an Economic and Strategic Research group. What did this group find? New homeownership is being driven by an ever-increasing number of diverse groups.
For instance, Millennial home buyers are moving from renting to buying in more numbers. Straddled with student loans, many have had no luck saving for a down payment.
First and second generation immigrants to the United States often pool their resources together to buy a home. Two families could live under the same roof. A group of single people might buy a home together to defray high housing costs.
Finally, the U.S. population is aging. Parents are moving in with their children. As of 2012, over 57 million people lived in a multi-generational household. That’s about twice the number as in 1980.
Adult children will need to buy bigger homes as they plan to house aging parents long term. The HomeReady program allows them to use their parents’ income to buy a bigger home.