Fannie Mae came out with the Home Ready program in December 2015, replacing the My Community Program. Home Ready is a 3% down conventional program designed to help people get into their own home.
In the past few months there have been a few changes and this summer there were some significant changes to the program. These changes should make it easier for people to use the program.
One of the biggest changes is the income limits. In the past you had to be at 80% of the area median income, unless you were in a low income census tract. That has changed now to allow for 100% of the area median income, with no limits if you are in a low income census tract. So for most of the Minneapolis/St Paul area, your income must be under $86,600.
Another change is the homebuyer education piece. In the past you needed to complete the Frameworks class, now you can also use a HUD approved counseling program and get a certificate with the pre-purchase counseling program or you can attend a HUD approved class if you are using a community second down payment assistance program. If you are using the program to do a rate term refinance, you no longer need to take the Frameworks class.
Another big change just announced is that the owner occupant of the new home may own other real estate at the time of closing. That was never allowed in the past.
Income from non-borrower household members may be considered even if they are not on the loan – so you are allowed to go up to 50% debt to income if there is qualifying non-borrower household income. This may allow you to qualify for slightly more home.
Once you qualify, the mortgage insurance will go away. This is a benefit compared to FHA loans where the mortgage insurance will not go away unless you refinance or sell your home.
With the new changes to the Home Ready program, more people will be able to use it. With a minimum down payment of 3%, that can be all gift, this will allow more people to get into a new home!