HomeReady and Home Possible: The Best 3% Down Conventional Loans

What Are HomeReady and Home Possible?

When most people think of low down payment mortgages, they immediately think of FHA loans. However, Fannie Mae and Freddie Mac offer two incredible Conventional loan programs designed specifically for low-to-moderate-income buyers: HomeReady (Fannie Mae) and Home Possible (Freddie Mac).

These programs allow you to buy a home with just a 3% down payment, offering a fantastic alternative to FHA loans, especially if you have good credit.

Key Benefits of These Programs

• Only 3% Down: You need very little cash to close, and the entire 3% can come from gift funds.
• Reduced Mortgage Insurance (PMI): Unlike standard conventional loans with 3% down, these programs offer heavily discounted Private Mortgage Insurance rates, keeping your monthly payment lower.
• Cancelable PMI: Unlike FHA loans (where mortgage insurance is usually permanent), the PMI on HomeReady and Home Possible can be canceled once you reach 20% equity in the home.
• Better Interest Rates: These programs include pricing waivers, meaning you get lower interest rates than a standard conventional loan would offer for the same credit score.

Income Limits and Eligibility

Because these programs are designed to help make housing affordable, there are income limits. Generally, your qualifying income cannot exceed 80% of the Area Median Income (AMI) for the location where you are buying the house.

However, there's a catch: we only count the income used to qualify for the loan. If you make $100,000 a year, but we only need $70,000 of your income to qualify for the house you want, we can use just the $70,000 to keep you under the income limit and get you into the program!

Boarder Income and Co-Borrowers

HomeReady has a unique feature: it allows you to use "boarder income" to qualify. If you have a roommate who has been living with you and paying rent for the last 12 months, and they will move into the new house with you, we can count their rent payments as income to help you qualify.

Is It Better Than FHA?

If your credit score is above 680, HomeReady or Home Possible is often cheaper monthly than an FHA loan because of the discounted, cancelable PMI. If your credit score is below 660, FHA might still be the better option.

Find Out If You Qualify

Want to see if your income qualifies for these amazing 3% down programs? Call Area Lending today at 407-329-9700. We can check your local AMI limits and get you pre-approved. (NMLS #2079475 / #2007119).