Last month, Fannie Mae announced HomeReady, an innovational lending option designed to help creditworthy borrowers afford a sustainable mortgage. This will replace MyCommunityMortgage, Fannie Mae’s previous low-moderate income lending product.
MyCommunityMortgage included options for qualified first-time homebuyers to pay a downpayment as low as 3%. It was only allowed if at least one co-borrower was a first-time homebuyer. HomeReady has updated the program to include both first-time and repeat homebuyers with down payments as low as 3%. Lenders will also have access to a new functionality through Desktop Underwriter that will automatically flag potentially ineligible loans and will be able to fully leverage Fannie Mae’s integrated suite of risk management tools. One of the overall goals is to help lenders find borrowers who have slipped through the cracks and been skipped over.
In other good news for lenders, Fannie Mae offers better pricing and simplicity that eliminates or caps standard loan level price adjustment.
Borrowers will be required to complete an online education course to prepare them for their home buying process and provide post-purchase support for sustainable homeownership. Framework (the online course) is provided by the Housing Partnership Network and the Minnesota Homeownership Center and is based on the requirements of the HUD Housing Counseling Program and National Industry Standards for Homeownership Education and Counseling (housingwire.com).
Another big update HomeReady includes is income from a non-borrower household member can be considered to determine the debt-to-income ratio for the loan that will help everyone from multi-generational households to young couples with only one signee. Fannie Mae’s research has showed that these extended households have incomes that are more stable than other households with similar income levels (fanniemae.com).
Other flexibilities include: non-occupant borrowers (e.g. parents of the homebuyers) and rental payments (e.g. renting a basement apartment) to supplement the borrower’s qualifying income.
HomeReady will be available to borrowers at any income level for properties in low-income census tracts and to borrowers at or below 100% of area median income for properties in high minority census tracts or designated natural disaster areas. For properties in remaining cencus tracts, HomeReady borrowers must have an income at or below 80% of AMI (housingwire.com).