What is a HomeReady Mortgage?

When it comes time to buy a home, some low- and middle-income Americans struggle to meet the initial financial requirements that come with many mortgages. This most often happens because of a low credit score or an inability to make a large down payment, but in either case, a little flexibility from lenders can enable these borrowers to finance the purchase of a new home. HomeReady mortgages exist for this purpose; by offering benefits designed to remove obstacles to homeownership faced by many individuals and families, they make it easier and less expensive to get a mortgage, especially in areas with a low median income. To learn more about HomeReady mortgages, keep reading as the experts at Customers Bank explain.

The Benefits of a HomeReady Mortgage

For borrowers with fewer resources, a HomeReady mortgage from Fannie Mae can lower the two greatest barriers to homeownership: cost and credit. Depending on the type of mortgage, someone looking to get financing to purchase a home might need a credit score of at least 620 to qualify for a loan, and even then, the loan they get will likely have a high rate of interest and rigid terms. Borrowers often need a credit score of at least 680 to receive an affordable mortgage, which can be tough to achieve. In addition, many lenders expect borrowers to provide a down payment of as much as 20% of the home’s purchase price – a significant expense.

Pursuing a HomeReady mortgage, however, can drastically reduce the financing requirements for qualifying borrowers. For instance, a HomeReady loan can provide up to 97% financing on single-family properties, which translates to a down payment of only 3% for some borrowers – much lower than the standard 20%. The minimum credit score is low as well; someone seeking a HomeReady loan only needs a credit score of 620 to qualify for the program.

Another major benefit of a HomeReady mortgage comes from its relationship to mortgage insurance. Typically, someone seeking financing on their home will have to pay an upfront cost for this type of insurance, plus monthly fees based on the size of their loan and their credit score. However, those receiving an HomeReady mortgage are spared those upfront premiums, and they have the option to cancel this insurance once they build up an adequate amount of equity in their home. These benefits allow borrowers to save money, both at the time of the purchase and later on.

And for those looking to share this expense with others, HomeReady mortgages grant the flexibility this process requires. Not only can non-occupants, such as parents and other family members, contribute financial support to the mortgage approval process, but the income of everyone living in the home may be considered as well. Also, lenders may take into account any rent or potential rent that may be collected. These options allow the borrower to supplement their income in certain situations and increase their chances of receiving the financing they need.

Requirements for a HomeReady Mortgage

Though HomeReady mortgages offer an array of benefits, not every potential homeowner will qualify for one of these loans. Along with the aforementioned minimum credit score of 620, the applicant cannot have an income higher than the area median income where they live. This number is based on the U.S. Census; the pertinent information on your area should be available on the Fannie Mae website. While you don’t have to be a first-time homebuyer to receive a HomeReady mortgage, you cannot already own a home with this mortgage type.

One other notable requirement when applying for a HomeReady mortgage is participation in a homeownership education program. Many borrowers will be able to complete the program online, though those who can’t may have other options, such as an in-person classroom course. Most of these courses last for between four to six hours, so the process shouldn’t take long, but the borrower will have to pay the cost of the course.

Other Mortgages Available from Customers Bank

To accommodate financing for a variety of clients, Customers Bank offers several different mortgage options, ranging from more conventional mortgages to government-backed loans. Whatever your financial needs or ideal home, consider the following mortgage options from Customers Bank:

  • Conventional financing
  • Jumbo mortgages
  • Pennsylvania Housing Finance Agency (PHFA) loans
  • Federal Housing Administration (FHA) loans
  • S. Department of Agriculture loans
  • Affordable Mortgage program loans
  • S. Department of Veterans Affairs (VA) loans
  • Asset Advantage Mortgages (non-QM loans)

Finance Your Next Home with a Mortgage from Customers Bank

Whether you’ve already got your sights set on a particular loan product or simply want to explore your options, the team at Customers Bank can help. Our loan officers have decades of experience helping clients purchase the homes of their dreams. Learn more today by visiting us online and providing some basic information or contacting a Customers Bank loan officer.