HomeReady Mortgage To 97% LTV

As you probably know, Fannie Mae does not make mortgage loans, however, they do purchase loans after an approved lender, broker, or bank has closed the loans. The loans must be underwritten to their guidelines for the type of mortgage product that is being submitted.

These are the basic guidelines for this HomeReady mortgage. You can get into a home with a 3% down payment, flexible sources, an income of flexible sources, and with a loan to value of 97%.

• Purchase LTV = 97%  Limited Cash-Out Refinance = 95% *ARM Product = 95% maximum financing.
• Purchase or limited cash-out refinancing.
• No minimum contributions from the borrower’s own funds.**
• Acceptable sources of funds for the 3% investment may come from gifts, grants Community Seconds, and cash on hand.
• If there are seconds, subordinate financing; restrictions will apply for the base loan to value, and combined loan to value. *lender will emphasize this
• The applicant may have an ownership interest in one other financed residential mortgage property at closing.

Flexible Source of Income, Non-occupant Borrower, Credit Scores, LTVs, and Reserves

• A non-occupant borrower is allowed up to a maximum LTV (loan to value) of 95%, however manually underwritten properties the LTV is limited to 90%, and a maximum DTI of 45%. Their income may be used to qualify, however, the income is subject to income limitations. There are no restrictions for a non-occupant borrower’s interest in another property. *Same as above
• Credit Score of 680 required if LTV ›75% (DTI of 36% or below) –  640 Credit Score for LTV ≤ 75% (DTI ≤ 36%) – 720 Credit Score for LTV › 75% (DTI ≤ 45%) –  680 Credit Score for LTV ≤ 75% (DTI ≤ 45%)
• 620 is the minimum credit score to qualify for this loan.
• Reserves are required if the Debt to Income Ratio(DTI) is 36% and credit score is 620, and LTV is less than or equal to 75% – 2 months.
• If the DTI is less than or equal to 35%, the credit score is 660 and the LTV is greater than 75% – 6 months.
• If the DTI is equal to, or less than 45% and the credit score is 700 with LTV greater than 75% 6 months’ reserves are required.
• Good News is- if DTI is equal to or less than 36%, the credit score is 680 with an LTV greater than 75%- No reserves.  If the DTI is Less than or equal to 36%, the credit score is 640 with an LTV of 75% or less- no reserves.
• Homebuyer education is required.

Note:

Some of this information is for manual u/w* without DU. *If Automated Underwriting is performed and DU gives an Approved Eligible…then whatever is keyed into the system ( as long as it is correct information) is what stands the test.

• Debt to Income Ratio (DTI) of 36% = 680 score  +- for lower credit scores, and lower LTV of 75%. Certain additional parameters may exist. 45% DTI for 720 credit scores for LTV from 75 % to 97%, and other required parameters that may exist. **Lower credit scores are allowed with certain criteria i.e. Desktop Underwriter Approved
• Mortgage Insurance is required for LTV ratios of greater than 90%
• The mortgage insurance can be canceled when the loan has reached 20% equity.

*Changes occur frequently, the specific lender may have their own restrictions. This is for sound lending practices and making sure loans do not default. *reserves may be required if credit scores are lower *LTV is below 75% credit scores may be down to 620 in certain circumstances. *Maximum LTV for an ARM loan is 95%

This is some basic information for you to review, please note this does not entail all of the requirements for this mortgage loan product. These specify some standard parameters.

Be Aware That All Borrowers Have Different Circumstances

All borrower loans have unique circumstances, which include funds for closing, credit information, debts to income, income, and other borrower needs. Those needs are applied to the basic criteria and then changes are made if it is within the capacity to do so.

Each area of an applicant’s financial, and credit application is analyzed, and if possible using the guidelines, the lender will make adjustments and approve this loan.

As stated some lenders use Fannie Mae’s automated underwriting system for approvals, these systems spit out the requirements for the loan. When a certain criterion is met, these systems will approve the loan subject to certain requirements.

When a lender has to manually underwrite a mortgage applicant’s loan file, the underwriter has a set of rules that must be applied to the loan also. Those rules may vary depending on the credit score, the LTV, the funds for closing, and the property type.

Note: Per March 2-22 the LTV cannot be greater than 95% for a manually underwritten HomeReady loan file.

Rules apply for each property type, (single-family-1 unit, 2-4 Units, etc.). We have voiced here only 1-unit property basic guidelines. Rules also apply differently for Limited Cash-out refinances.

HomeReady Mortgage Loans

This mortgage product goes beyond the standard guidelines for conventional mortgage lending as stated, and FHA as well. People’s needs vary and you have the right to know that if your needs require different initiatives there are products available.

If do not have assets to pay for a standard 3% down payment or a higher credit score,  this product gives other options.

Check with your lender of choice and they should be proficient in giving you the best solution for buying your new home. The lender wants to help you purchase a home, or refinance your existing home, therefore, you must build your trust in them to do so.

Do not be afraid to voice your true financial circumstances to your lender of choice. Getting it right the first time actually saves a lot of time to get to closing.

Disclosure for HomeReady Mortgage to 97% LTV

As stated this is a mortgage product of Fannie Mae which allows flexible underwriting for this  Home Ready Mortgage, Affordable Housing product. Most lenders will offer this product.

However, these guidelines may vary for certain aspects of the mortgage, the loan file, and verified financials and this is for informational purposes.

Minimum credit scores may be slightly different for a lender as it is their exclusive responsibility to have sound lending practices.

These noted guidelines are only basic, and mortgage guidelines change frequently. There is no guarantee that you will qualify for this product, however, this should help you before you go to the lender. Your ability to qualify is based on your total financial status.

Never fail to ask questions…it is your money, your loan, and will be your largest debt.

FDIC Information for HomeReady Loans

Updated  03/20/2022