Fannie Mae HomeReady® Mortgage

What is Fannie Mae’s HomeReady® Mortgage?

Fannie Mae HomeReady is a conventional mortgage program for buyers whose qualifying income is at or below 80% of the area median income for the home’s location. You can put as little as 3% down on a one-unit home, and gifts or grants can cover all of it. Mortgage insurance is reduced and can be canceled.

It’s open to first-time and repeat buyers, and it’s one of the few conventional loan programs that can count rent from a boarder as qualifying income.

Understanding Fannie Mae

Fannie Mae, formally known as the Federal National Mortgage Association (FNMA), is a government-sponsored enterprise (GSE) in the United States. Established during the Great Depression, its primary mission is to expand the secondary mortgage market by securitizing mortgages, allowing lenders to reinvest their assets into issuing more loans. Fannie Mae’s role is pivotal in increasing the availability of mortgages for homeowners.

Unlike a mortgage lender, Fannie Mae does not provide loans directly to consumers. Instead, it operates in the secondary mortgage market, ensuring liquidity, stability, and affordability in the housing market by purchasing and guaranteeing mortgages from other lenders.

Who is the Ideal Candidate for a HomeReady Mortgage?

Are you considering a HomeReady® Mortgage but not sure if it’s right for you?

This program is specifically tailored for:

• Individuals with low-to-moderate income.
• Both first-time and repeat homebuyers.
• Those with limited cash for a down payment.
• Applicants who have supplemental boarder or rental income.
• People looking to purchase or refinance a property.

What Makes the HomeReady Mortgage Unique?

What sets the HomeReady Mortgage apart from traditional mortgage options? Here’s what you need to know:

• Low Down Payment: Offering as low as 3% down payment, it eases the burden for home purchases and allows for higher refinance loan balances.
• Flexible Funding: The program allows multiple sources for the down payment and closing costs, including gifts, grants, and more, with no minimum personal funds requirement​.
• Rental Income: It includes rental income as qualifying income, even rent from boarders.
• Works With Assistance Programs: HomeReady can be paired with Community Seconds® and grants to further reduce a buyer’s cash to close.
• Affordable Mortgage Insurance: Mortgage insurance coverage requirement is reduced, and you can generally request cancellation once your loan-to-value ratio drops below 80%. It ends automatically at 78%.

Key HomeReady Guidelines

These guidelines decide whether a HomeReady loan fits your file.

• Income Limits: Total qualifying income can’t exceed 80% of the area median income (AMI) for the property’s location. Because the limit follows the address, check the HomeReady income limits for the specific home you are looking to buy.
• Property Eligibility: The property must be a primary residence, but includes all home types: single-family homes, condos, multi-units, and manufactured homes.
• Credit Score: A minimum credit score of 620 is required, with better terms for higher scores.
• Mandatory Homeownership Education: If every borrower who will live in the home is a first-time buyer, at least one must complete a homeownership course. Fannie Mae’s free HomeView® course qualifies.
• Debt-to-Income Ratio: A favorable debt-to-income ratio is necessary to qualify.
• Rental Income: Rental or boarder income can be included in your income calculation.
• Mortgage Insurance: Mortgage insurance is required but can be reduced or cancelled under certain conditions.
• Refinancing Options: Refinancing is available.

Pros and Cons of the Fannie Mae HomeReady® Mortgage

Pros

Low Down Payment

Requires as little as 3% down on a one-unit home with a fixed-rate loan up to the baseline conforming limit ($832,750 in 2026). High-balance loans in high-cost counties need more down.

Flexible Funding

Accepts various funding sources for down payments and closing costs, including gifts, grants, and community aid, reducing the financial burden on the borrower.

Rental Income Consideration

Includes rental income in the borrower’s income calculation, enhancing loan eligibility and possibly improving the debt-to-income ratio.

Most other loans will not allow you to use rental income from someone living in your home, or what is typically called “boarder income”. Allowing for this type of income is a unique feature for HomeReady.

Reduced and Cancellable Mortgage Insurance

Features reduced mortgage insurance requirements and allows cancellation once your loan-to-value ratio drops below 80%, potentially saving borrowers significant money over the loan’s lifespan.

No Designated-Area Requirement

HomeReady isn’t limited to certain neighborhoods or census tracts. The same 80% AMI income limit applies everywhere, and the loan amount follows the conforming limit for the home’s county.

Homeownership Education

For first-time buyers, mandatory education courses ensure borrowers are well-prepared for the responsibilities of homeownership

Waived Pricing Adjustments

Fannie Mae waives its loan-level price adjustments on HomeReady loans. Those adjustments normally add cost for lower credit scores and smaller down payments, so the waiver can mean better pricing than a standard conventional loan for the same borrower.

Cons

Income Limits Based on Area Median Income

The program’s eligibility is tied to the area’s median income, which might restrict higher-income earners from qualifying, and restricts buying power overall.

Property Type Restrictions

While all property types are allowed, a minimum of 5% down is required for 2-4 unit properties.

Mandatory Education Requirement for First-Time Buyers

Requires completion of homeownership education, which could be a hurdle for some first-time borrowers​​.

Primary Residence Requirement

The program is strictly for primary residences, limiting options for those seeking loans for investment properties or vacation homes.

More Documentation

Counting boarder or rental income takes extra paperwork, so these files need more upfront work than a standard application.

HomeReady vs HomePossible: Which is Right for You?

Both HomeReady and Freddie Mac’s HomePossible are designed to assist low-to-moderate-income borrowers. While they share similarities, such as low down payments and flexible credit requirements, there are differences. One clear difference shows up on manually underwritten loans, where Freddie Mac Home Possible requires a 660 credit score for a one-unit fixed-rate purchase and HomeReady’s minimum is 620. Understanding these differences can help you decide which program better suits your needs.

How Does HomeReady Compare to FHA Loans?

When comparing HomeReady with FHA loans, some key differences emerge:

• Both require a low down payment, but HomeReady is slightly lower at 3% compared to FHA’s 3.5%.
• HomeReady mortgage insurance can be canceled once you build enough equity. FHA’s annual premium lasts 11 years with at least 10% down and the life of the loan with less.
• 3-unit and 4-unit properties do not need to pass the “self-sustainability” test with HomeReady, as they do with FHA. This FHA requirements means that the home must cash-flow in order to be approved. HomeReady mortgage insurance premiums may be lower than FHA’s if a buyer has strong credit scores. But, FHA’s one-size-fits-all mortgage insurance premiums may be lower for buyers with credit challenges.

How to Apply for a Fannie Mae HomeReady Loan

To apply for a HomeReady loan, gather the necessary documents, such as proof of income, rental income records, and information on your current debts. JVM Lending is very experienced in providing Fannie Mae loans and can guide you through the process and ensure you meet all the program requirements.

Contact us today to discuss your homeownership goals or start your JVM loan application online.

Frequently Asked Questions

Is There an Educational Component to HomeReady Mortgages?

Yes. If all occupants are first-time homebuyers, at least one borrower must complete homeownership education. This requirement can be satisfied through Fannie Mae HomeView®​​.

What Are The HomeReady Income Limits?

HomeReady income limits are 80% of the area median income (AMI) for the home’s location, and Fannie Mae’s 2026 AMIs took effect June 13, 2026. Our guide to 2026 HomeReady income limits walks through the lookup and how the limit is calculated.

How Can You Check Your Income Eligibility for HomeReady?

Wondering about your eligibility? Fannie Mae provides an interactive Area Median Income Lookup Tool. This tool allows you to quickly check income eligibility by area or property address. It’s a handy resource to assess your qualifications for the HomeReady program​​.

What Are The Fannie Mae Loan Limits?

Fannie Mae loan limits are the conforming limits the FHFA sets each year, and they vary by county. For 2026, the baseline limit for a one-unit home is $832,750, and high-cost counties go up to $1,249,125. Check the latest Fannie Mae loan limits to see the limit for your county.

How Does Rental Income Help You Qualify?

One of the unique aspects of the HomeReady program is its inclusion of rental income in the borrower’s total income calculation. This means if you’re receiving income from renting out a portion of your property to boarders, it can enhance your loan eligibility and potentially improve your debt-to-income ratio. This inclusion is a significant advantage for those with additional income sources.

There are several complexities to how this income is considered, but 2 important components are: (1) the boarder must have lived with you for at least 12 months, and (2) the boarder must move in with you to the new location.

One way to think of this rule is that it allows for buyers who have split rent with roommates in the past to continue receiving rent from those roommates in the future, and counts that rent as reliable income. Rent must have been paid from the boarder to the buyer, and may not have been paid directly to a third party (like the landlord).

Take the Next Step with JVM Lending

If you’re considering applying for a Fannie Mae HomeReady® Mortgage, understanding these key aspects can help you make an informed decision. Whether you’re a first-time buyer or looking to refinance, this program offers unique benefits tailored to a wide range of financial situations. Are you ready to take the next step toward homeownership?

Our team at JVM Lending is here to guide you every step of the way. Start your JVM loan application online or contact us today to discuss your homeownership goals and see whether Fannie Mae’s HomeReady mortgage fits your plans.