Buying a home is a major financial milestone, but coming up with a sizable down payment can feel out of reach for many hopeful home buyers. That’s where low down payment loan programs like Fannie Mae’s HomeReady mortgage come into play.
Designed specifically for low- to moderate-income borrowers, the HomeReady loan allows home buyers to make an upfront payment of just 3%. Plus, it offers reduced mortgage insurance costs and flexible underwriting, making it one of the most accessible and affordable mortgage options available.
This guide breaks down the details of the HomeReady loan, how it works, loan requirements, and how it compares to other low down payment loan options.
The HomeReady mortgage is a conventional loan program from Fannie Mae that offers financing with as little as 3% down. It’s designed to help low- to moderate-income borrowers buy a home, even with limited savings or non-traditional financial profiles.
HomeReady removes common barriers to homeownership by offering reduced down payment requirements, flexible income and credit criteria, and cancellable mortgage insurance.
Make your dream home a reality with the right mortgage.
View RatesHomeReady mortgages are designed for a range of home buyers, including the following:
3%
620+
Less than 80% of Area Median Income (AMI)
– Single-family primary residences
– Condos
– Co-ops
– 2-4 unit properties
– Manufactured homes
– Required with less than 20% down
– Cancellable once equity reaches 20%
First-time home buyers must complete homebuyer education
Yes, including non-occupant income contributors
– Personal savings
– Gift funds from family members
– Down payment assistance programs
– Employer-assisted housing programs
– Sweat equity
Fannie Mae requires that first-time home buyers complete a homebuyer education course as part of the HomeReady loan criteria. Their preferred option is HomeView, a free online course that borrowers can go through at their own pace.
The purpose of this requirement is to help borrowers understand budgeting, home maintenance, and mortgage responsibilities to ensure long-term financial success.
Borrowers have a few other low down payment loan programs to choose from, including FHA loans, VA loans, and Freddie Mac’s Home Possible loans. Here’s how they compare:
HomeReady
Home Possible
FHA Loans
VA Loans
Down Payment
3%
3%
3.5%
0%
Mortgage Insurance
– Yes
– Can be canceled
– Yes
– Can be canceled
– Yes
– Cannot be canceled
None
Income Limits
Up to 80% AMI
Up to 80% AMI
None
Must be a qualifying veteran
Credit Score
620+
620+
580+
No minimum
As noted, the HomeReady mortgage program allows only 3% down. That means borrowers can finance up to 97% of the home’s value.
What’s more, no minimum personal down payment contribution is required, meaning borrowers don’t have to contribute their own savings. Instead, the full down payment and closing costs may be covered by various eligible sources, including the following:
This down payment flexibility is a major benefit compared to some other mortgage programs.
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Unlike FHA loans, which require mortgage insurance for the life of the loan, HomeReady offers:
This can save hundreds of dollars a year, making monthly payments more affordable over time.
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Yes, HomeReady can be used to either purchase a home or refinance an existing mortgage. Refinancing can help borrowers obtain a lower interest rate or reduced monthly payments.
Get StartedHomeReady mortgages offer borrowers a unique loan program with low down payment requirements and flexible funding sources. However, there are also some potential drawbacks to be considered before applying.
Pros:
Cons:
Yes, the down payment can come from gift funds or grants for 1-unit properties. That means you don’t need to come up with funds from personal savings as a down payment.
No, repeat buyers can also access HomeReady mortgages, as long as they meet income and property requirements.
Yes, but premiums are lower compared to FHA loans.
Yes, PMI may be canceled once your loan balance dips under 80% of the home’s value.
A minimum credit score of 620 is typically required. The higher your credit score, the better the chances of loan approval with lower rates and PMI premiums.
Yes, rental income from roommates or boarders can be counted as qualifying income, which is ideal for multigenerational households.
Yes, HomeReady allows for limited cash-out refinances for existing Fannie Mae loans, with up to 97% LTV.
Yes, HomeReady accepts self-employed, freelance, and other non-traditional income sources, as long as they’re properly documented.
You’ll need to work with a Fannie Mae-approved lender, meet income eligibility criteria, complete the education course (if you’re a first time buyer), and submit your application with required documents.
Our loan officers are ready and waiting to help you apply for your home loan.
Whether you’re a first-time home buyer, have limited savings, or want to use non-traditional income to qualify for a mortgage, the HomeReady loan program from Fannie Mae may be the key to unlocking your future home. With low down payment requirements and flexible terms, HomeReady may be a more accessible mortgage option for you.
If you’re looking to buy a home in the Pacific Northwest region but have limited savings for a down payment, we can help. At Sammamish Mortgage, we offer various mortgage home loan programs in WA, OR, ID, CO, and CA. Contact us today to have your mortgage questions answered, or visit our website to get an instant rate quote.
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Whether you’re buying a home or ready to refinance, our professionals can help.
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