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HomeReady Mortgage (Fannie Mae)

Administered by:

Fannie Mae (Federal National Mortgage Association)

· Federal · Government-Guaranteed Mortgage

Funding status: Active

About the HomeReady Mortgage (Fannie Mae)

The HomeReady Mortgage from Fannie Mae is a conventional loan product that lets buyers purchase a primary residence with as little as 3% down. Unlike FHA loans, HomeReady does not require any of that 3% to come from the borrower's own funds. The entire down payment can be covered by gift money, grants, employer assistance, or state and local down payment assistance programs. Fannie Mae sets the guidelines, but private lenders originate and service the loans, so HomeReady is available through banks, credit unions, and mortgage companies nationwide.

Buyers must have a total household income at or below 80% of the Area Median Income (AMI) for the property's location, and the home must be a primary residence. Eligible property types include single-family homes, condos, planned unit developments, and manufactured housing. Fannie Mae removed its hard 620 minimum credit score requirement in late 2025, so Desktop Underwriter now evaluates risk holistically and may approve borrowers below 620 if they have strong compensating factors like low debt or significant reserves. Repeat buyers are eligible, and the program allows flexible income sources such as boarder income and non-borrower household income to help qualify.

HomeReady stands out from FHA loans and Freddie Mac's Home Possible program in one critical area: PMI cancellation. With HomeReady, private mortgage insurance drops off automatically once you reach 78% loan-to-value, or you can request cancellation at 80% LTV. FHA mortgage insurance, by contrast, stays for the life of the loan on most FHA purchases. HomeReady also carries reduced PMI rates compared to standard conventional loans. First-time buyers with incomes at or below 50% AMI may qualify for a $2,500 lender credit toward down payment and closing costs, available through December 31, 2026.

How much assistance

Up to conforming loan limits ($832,750 standard / $1,249,125 high-cost in 2026); 3% minimum down payment

Eligibility

Income limits: Household income at or below 80% of Area Median Income (AMI) for the property's location
First-time buyer required: No
Geographic restrictions: Available nationwide; primary residence only; 1-unit properties, condos, PUDs, manufactured housing
Homebuyer education required: No

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How to Apply for HomeReady Mortgage (Fannie Mae)

Step 1: Check your income eligibility

HomeReady requires your total household income to be at or below 80% of the Area Median Income (AMI) for the property location. Use Fannie Mae's AMI lookup tool at singlefamily.fanniemae.com to check your county's limit. Income includes all borrowers on the loan, but non-borrower household members' income is not counted against the limit unless needed to qualify.

Step 2: Complete homebuyer education if required

If all occupying borrowers are first-time homebuyers, at least one must complete a homebuyer education course. Fannie Mae's free online HomeView course at homeview.fanniemae.com satisfies this requirement and takes about 4 to 6 hours. Repeat buyers or loans where at least one borrower has owned before are exempt from this requirement.

Step 3: Find a lender offering HomeReady

HomeReady is available through any Fannie Mae-approved lender, which includes most banks, credit unions, and mortgage companies. Ask your lender specifically about HomeReady pricing because the reduced PMI rates only apply when the loan is delivered to Fannie Mae as a HomeReady loan. National lenders like Rocket Mortgage, loanDepot, and Guaranteed Rate all offer HomeReady, as do most local lenders.

Step 4: Gather your documentation

Prepare your last two years of W-2s and tax returns, your most recent 30 days of pay stubs, two months of bank statements, and a valid government-issued ID. If you plan to use boarder income or non-borrower household income to qualify, have documentation for those sources ready as well.

Step 5: Apply and get pre-approved

Your lender will run your application through Fannie Mae's Desktop Underwriter (DU) system, which evaluates your credit, income, assets, and the property. DU determines your approval and whether any compensating factors offset lower credit scores. If you are using a down payment assistance program, tell your lender during application so they can structure the loan correctly.

Step 6: Close on your home

Once you find a home and your offer is accepted, your lender processes the loan through standard underwriting and closing. HomeReady closings follow the same timeline as any conventional mortgage, typically 30 to 45 days from contract to closing. PMI will be included in your monthly payment but can be cancelled once you reach 80% loan-to-value.

Real Cost Example

On a $420,000 home in Charlotte using a HomeReady Mortgage, the minimum 3% down payment comes to $12,600. Because HomeReady requires no minimum personal contribution, that entire amount can come from a down payment assistance program like the FHLBA First Time Homebuyer Product, which provides up to $17,500 as a forgivable loan. The FHLBA assistance would cover the full $12,600 down payment with $4,900 left over to apply toward closing costs.

Estimated closing costs in Charlotte run $8,500 to $12,500, so after applying the $4,900 remainder from the FHLBA program, a buyer would still need roughly $3,600 to $7,600 for closing costs out of pocket. First-time buyers with incomes at or below 50% of the Area Median Income may also receive a $2,500 lender credit from Fannie Mae, reducing out-of-pocket costs further.

For maximum assistance, a buyer could pair HomeReady with the FHLBA Community Partners Product ($20,000 forgivable) instead. That $20,000 would cover the $12,600 down payment plus $7,400 toward closing costs, potentially leaving only $1,100 to $5,100 out of pocket on a $420,000 purchase.

Combining With Other Programs

HomeReady is designed to work with down payment assistance programs, grants, and Community Seconds. In North Carolina, buyers can pair a HomeReady Mortgage with Federal Home Loan Bank of Atlanta (FHLBA) products like the First Time Homebuyer Product ($17,500 forgivable), Community Partners Product ($20,000 forgivable), or Workforce Housing Plus+ ($15,000 grant). These FHLBA programs are available through participating member lenders and can cover part or all of the 3% down payment and closing costs.

HomeReady cannot be combined with state housing finance agency first mortgage products like the NC Home Advantage Mortgage, since both are first mortgage programs. The NC 1st Home Advantage Down Payment ($15,000) is typically paired with the NC Home Advantage Mortgage rather than HomeReady. Buyers must choose between using HomeReady as their first mortgage or using the NCHFA first mortgage with its own DPA options.

For the strongest HomeReady combination in North Carolina, pair it with an FHLBA program for up to $20,000 in forgivable assistance plus the $2,500 Fannie Mae lender credit (if income-eligible), for a potential $22,500 in combined help toward your down payment and closing costs.

Pros and Cons

HomeReady's biggest advantage is the combination of a 3% down payment with no minimum personal contribution and cancellable PMI. This makes it one of the most cost-effective low-down-payment options available. Compared to FHA loans, HomeReady borrowers save money long-term because PMI drops off at 80% LTV while FHA mortgage insurance stays for the life of the loan. The reduced PMI rates also mean lower monthly payments from day one compared to standard conventional loans. Allowing boarder income and non-borrower household income gives buyers additional flexibility to qualify that most other programs do not offer.

The main limitation is the income cap at 80% of AMI, which excludes moderate-income buyers who earn too much for HomeReady but still struggle with down payment savings. Buyers who can put 5% or more down may find better rates on standard conventional loans without the income restriction. The program also requires the property to be a primary residence, so investors and second-home buyers cannot use it. Compared to USDA loans (0% down) and VA loans (0% down), HomeReady still requires 3%, which means buyers who qualify for those programs may find them more advantageous.

Frequently Asked Questions

Is the HomeReady Mortgage an FHA loan?+

No. HomeReady is a conventional loan backed by Fannie Mae, not an FHA loan insured by the government. This distinction matters because conventional loans allow you to cancel private mortgage insurance once you reach 80% loan-to-value, while FHA loans require mortgage insurance for the life of the loan on most purchases. HomeReady also carries lower PMI rates than standard conventional loans. Your lender originates the loan using Fannie Mae's guidelines and sells it to Fannie Mae on the secondary market.

Do I have to be a first-time homebuyer for HomeReady?+

No. Repeat buyers are eligible for HomeReady as long as their income is at or below 80% of the Area Median Income for the property location. The only first-time buyer requirement is for homebuyer education: if all occupying borrowers are first-time buyers, at least one must complete Fannie Mae's free HomeView course. Repeat buyers are exempt from the education requirement. However, the $2,500 lender credit is only available to first-time buyers with incomes at or below 50% AMI.

Can I use down payment assistance with a HomeReady Mortgage?+

Yes. HomeReady is specifically designed to work with down payment assistance programs, grants, gifts, and Community Seconds. There is no minimum personal contribution required, so your entire 3% down payment can come from assistance programs. In North Carolina, FHLBA programs like the First Time Homebuyer Product ($17,500 forgivable) and Community Partners Product ($20,000 forgivable) can be paired with HomeReady to cover the down payment and a portion of closing costs.

What credit score do I need for HomeReady?+

Fannie Mae removed the hard 620 minimum credit score requirement for HomeReady in November 2025. Desktop Underwriter now evaluates each application holistically, meaning borrowers with scores below 620 may be approved if they have strong compensating factors like low debt-to-income ratios, significant cash reserves, or a large down payment. In practice, most approved HomeReady borrowers still have credit scores of 620 or above, but the removal of the hard floor gives more flexibility.

How is HomeReady different from Freddie Mac Home Possible?+

Both programs offer 3% down payment conventional loans for buyers with incomes at or below 80% AMI, but there are differences in the details. HomeReady allows boarder income and non-borrower household income as qualifying income sources, which Home Possible does not. HomeReady also offers the $2,500 lender credit for very low-income first-time buyers (at or below 50% AMI). Both programs allow cancellation of PMI at 80% LTV. Buyers should compare rates and PMI pricing from lenders offering both products.

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