The Fannie Mae Home Ready program is quickly becoming the preferred loan for first time home buyers in NC. The reason for this interest, is because Fannie Mae takes a “liberal” stand in underwriting Student Loan Debt. To qualify for this mortgage, there are Home Ready income limit requirements that vary based upon where you are buying a home… literally, one side of the street might have different income limits than the other side of the street!
Home Ready Qualifications
The Home Ready Mortgage Program only requires a 3% down payment. In NC, this Conventional Loan by Fannie Mae will work with NC Housing Finance Agency Down Payment Assistance.
Because of that, if you qualify, you can buy a house with no down payment! Does that mean you don’t need any money to buy a house? No it does not.
You will still be required to pay closing costs and pre-paid items like Home Owner’s Insurance and your portion of the tax bill. These closing costs CAN be paid by the Seller, but in today’s competitive environment for a home, you should have some cash available.
If you are putting less than 20% down for a Conventional Loan, then you are required to have PMI or Private Mortgage Insurance.
The PMI Coverage Rate for the NCHFA Affordable Home Program is .18%. This means your payments on this program are significantly lower than any other form of PMI. There’s no upfront fee to be paid, and the rate does NOT change based upon higher or lower credit scores. It is, by far, the best game in town on a Conventional Loan. The mortgage interest rate for the program is set by the State, and it will not vary based upon what lender you use.
While it’s the lowest PMI Rate available in NC, your MORTGAGE Interest rate is likely to be slightly higher than what we are quoting for other Conventional Loans. Again, this mortgage rate is SET BY THE STATE, and it changes pretty regularly. Even with the slightly higher interest rate, the “break” for the lower PMI Rate (especially for those with credit scores under 700) makes this a GREAT program, saving most folks over a $1000 a year.
If you don’t need the Down Payment Assistance, you will have a slightly lower mortgage interest rate, but your PMI might be higher – so this is where we do all sorts of calculations for you to find the right balance.
STUDENT LOAN DEBT: Some income-driven repayment plans allow a borrower’s payment to go to $0. In that case, how is the student Loan payment calculated?
With Fannie Mae’s Home Ready Mortgage it’s pretty simple… As long as your can provide documentation showing the income driven Student Loan payment is $0, we can qualify you with $0 for the monthly qualifying payment.
We are to take the paperwork given us by the borrower and send that to the credit bureau for them to reflect IBR (or income driven repayment plan) on the credit report with the actual payment of zero.
The maximum Debt to income ratio for a Home Ready Loan is now a total ratio of 50%. This includes the payment for the new home, plus all other debt reporting to a credit bureau.
When there are 10 or less recurring monthly payments remaining on an installment debt and if the monthly payment doesn’t significantly affect the borrower’s ability to meet all obligations, Fannie will allow us to exclude the monthly payment.
The Home Ready Mortgage Loan requires a 3% Down Payment. If you are applying for the Down Payment “Grant” (It’s Down Payment Assistance, but some people use the “G” Word), then the maximum Debt to Income Ratio is capped by the Housing Program at 43.0000%.
Home Ready Income Limit Requirements
To qualify for the Home Ready programs you will need to be under the Income Limit for the home you wish to purchase. As you can see from the map I clipped below of an area in Cary, near Cary High School and Downtown, many areas have NO Income Limits. When calculating the Home Ready Income Limit it’s important to remember we are NOT using Household income like we do for other programs.
We only need to count the income we are using to qualify you towards the area income limits. So if we don’t use any bonus, shift differential etc to qualify you for the mortgage, then we don’t have to count it towards the limit like we would on a USDA loan.
If you are making a 3% down payment, which can be a gift, Fannie Mae’s Home Ready Mortgage will allow us to include a non-owner-occupied co-borrower to qualify. We would have to consider their income when looking at whether you are within the Home Ready Income Limit for the home you are interested in. You can’t use a mortgage grant program, and a non-owner-occupied co-borrower.
We can also use boarder income with the Fannie Home Ready Program. You can also use boarder income without proof of claiming it on tax returns. This is the kind of income where you have been renting a home, and your roommate pays YOU the rent, not the landlord for at least 12 months.
In that case, we can use that income (assuming they are going to move in with you in the new home) and it will be part of the Home Ready Income Limit calculations. There is a cap on the amount of Boarder income that we can use to offset a higher Debt to Income (DTI) ratio – so if you are going to use this feature to qualify, go ahead and call us so we can talk with you about it 919 649 5058.
To use the HomeReady Mortgage Program, you can have an existing property. You also don’t have to be a first time home buyer to meet the Home Ready Mortgage Requirements. If you are using the Mortgage Down Payment Assistance program, you can not have owned a home in the last 3 years as a primary residence.
If you have more questions about Home Ready income limit requirements, please call Steve and Eleanor Thorne 919 649 5058. Working with First Time Home Buyers takes someone who REALLY knows Program Requirements to be able to look at your overall debt to income ratio and find the right program for you. We want to help you get the numbers to work. We deal with SOOO many folks who have various types of deferred student loans, and unusually debt situations, that we know what WILL work, and what won’t. Call Steve and Eleanor Thorne 919 649 5058 and get Pre-Qualified today!
I try and answer all questions :)