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A MORTGAGE program could provide significant financial relief for low-to-moderate-income homebuyers, offering a $2,500 credit for certain borrowers.
The federal government sponsors various grants, credits, and forgivable loans, which aim to make homeownership more accessible.
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Until February 2025, borrowers who qualify for a Fannie Mae HomeReady or Freddie Mac Home Possible mortgage may receive a $2,500 credit toward down payments or closing costs.
To be eligible, applicants must earn no more than 50% of the area median income (AMI) where the property is located.
Both programs are designed to assist lower-income borrowers in securing affordable mortgage terms with low down payments.
The HomeReady loan, for example, allows for a down payment as low as 3%, making homeownership more attainable for families who may not have substantial savings.
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STAYS FLEXIBLE
One of the key advantages of the HomeReady program is its flexibility in counting income sources.
Borrowers can include income from non-occupant co-borrowers—those who may not live with the borrower but are willing to help with the loan.
Additionally, income from renters or boarders living in the home can be considered, as long as it adheres to program limits.
KNOW THE REQUIREMENTS
To qualify for a HomeReady loan, several criteria must be met:
- Income Limits: Borrowers must earn no more than 80% of the AMI for their area.
- Credit Score: A FICO score of at least 620 is typically required.
- Primary Residence: The home must be the borrower’s primary residence.
- Homeownership Education: Borrowers must complete a 4- to 6-hour online homeownership education course from a HUD-approved agency.
WHAT’S HOME POSSIBLE?
Freddie Mac’s Home Possible program operates similarly to HomeReady.
It offers a 3% down payment option and an income limit of 80% AMI.
However, a notable difference is the minimum credit score requirement.
Home Possible loans typically require a score of 660.
This, compared to HomeReady’s more lenient 620 minimum.
BENEFITS FOR NEW BUYERS
Both HomeReady and Home Possible allow refinancing options with up to a 97% loan-to-value ratio in some cases.
PROPERTY TYPES ELIGIBLE FOR HOMEREADY FINANCING
The HomeReady program offers a range of property types that can be purchased with its financing. These include:
- Single-family homes
- Condominiums
- Homes in planned unit developments (PUDs)
- Co-ops
- Manufactured homes
- Multi-family homes with 2-4 units (with higher credit score requirements)
This means borrowers can refinance even without 20% equity in their homes, potentially reducing their interest rates and monthly payments sooner.
For eligible buyers and refinancers, these programs represent a significant opportunity to achieve homeownership or reduce mortgage costs, especially with the added benefit of the $2,500 credit available through early 2025.
Buyers should consult with lenders to explore their options and determine eligibility based on income and local AMI limits.
In other mortgage news, an increasing number of Americans are using their home equity to quickly access cash without turning to traditional loans or mortgages.
The U.S. Sun also has plenty of coverage on all things real estate.
