The HomeReady loan program, sponsored by Fannie Mae, is designed to help low- and moderate-income homebuyers by offering flexible mortgage options and lowering barriers to homeownership. Here are the main HomeReady loan benefits:

  1. Low Down Payment Requirement: HomeReady loans require a minimum down payment of just 3% of the home’s purchase price. For example, on a $300,000 home, that’s only $9,000—much less than the 20% often required on conventional loans. This lowers the upfront cash needed to buy a home.

  2. Flexible Income Sources: Unlike many loan programs, HomeReady allows borrowers to count various types of income toward qualification:

  • Rental income from boarders or non-family members.
  • Income from accessory dwelling units (ADUs) like in-law suites.
  • Earnings from self-employment or side businesses, when verifiable.
  • Income from non-occupant co-borrowers (relatives who co-sign but don’t live in the home).
    This flexibility opens homeownership to those with diverse income streams.

  1. Reduced Mortgage Insurance (MI) Costs and Cancellation: HomeReady loans typically have lower monthly private mortgage insurance (PMI) premiums compared to FHA loans. They also do not charge an upfront MI premium, saving money at closing. Importantly, PMI can be canceled once the loan-to-value (LTV) ratio drops to 80%, either through paying down the principal or from home appreciation. See our Mortgage Insurance Cancelation article for details.

  2. Variety of Eligible Property Types: HomeReady loans support purchases of single-family homes, condominiums, co-op units, planned unit developments (PUDs), and even manufactured homes. This broad eligibility expands housing options.

  3. Homebuyer Education Requirement: At least one borrower must complete an approved homeownership education course. These courses provide essential knowledge about budgeting, mortgage management, and home upkeep to help ensure borrowers are prepared for homeownership. Learn more at our Homebuyer Education Certification page.

Eligibility Criteria

To qualify for a HomeReady loan, borrowers must generally meet:

  • Income limits at or below 80% of the Area Median Income (AMI) for the property’s location.
  • A minimum credit score usually between 620 and 640 (varies by lender).
  • Reasonable debt-to-income (DTI) ratio to ensure affordability.
  • Completion of a homebuyer education course.

How HomeReady Compares to Other Loans

Compared to FHA and standard conventional loans, HomeReady offers a low down payment with more flexible income options and the ability to cancel PMI when the LTV reaches 80%. This unique combination makes it a strong option for qualifying borrowers.

Tips for Applying

  • Verify your area’s income limits using Fannie Mae’s lookup tool.
  • Check and improve your credit score well before applying.
  • Complete the required homebuyer education early.
  • Save for closing costs, which typically range from 2% to 5% of the loan amount.
  • Shop multiple lenders, since not all offer HomeReady loans or have identical requirements.

Common Misconceptions

  • Not just for first-time buyers: Repeat buyers can qualify if they meet income and other requirements.
  • Not a government handout: It is a standard mortgage product backed by Fannie Mae, a government-sponsored enterprise, but issued by private lenders.
  • Flexible credit requirements: HomeReady loans accept lower credit scores than many conventional loans.

For more detailed information, visit the official Fannie Mae HomeReady page or review the Private Mortgage Insurance (PMI) glossary entry.

By leveraging HomeReady benefits, many low- to moderate-income buyers can achieve homeownership with manageable upfront costs and more forgiving credit criteria.