There is currently a mortgage loan available that blows most of the other options out of the water, though.
It is Fannie Mae's Home Ready Mortgage.
Why Home Ready ROCKSThere are multiple reasons why this program is exceptional. They include:
- Conventional loan - Home Ready is a conventional loan with all of the positive features of a conventional loan including no upfront mortgage insurance/funding fees, more flexible property standards, and the ability to eventually get the private mortgage insurance (PMI) dropped from the payment.
- Only 3% down needed - This program only requires a 3% down payment and that down payment can be gifted from a family member if needed.
- Not limited to first-time homebuyer - You used to have to be a first-time buyer to use this loan but they changed that in July. This is a BIG win. Huge.
- Can own another property - If a person owns a house already and wants to buy another one that they'll live in, they can do that with this loan without having to sell the current house first.
- Cheaper PMI - The private mortgage insurance rate is cheaper on this loan than on the typical 3% down mortgage.
- Better interest rates for lower credit scores - this loan program doesn't charge a higher interest rate for 680-740 credit scores like most conventional mortgages do. This lack of a credit score adjustment is a big win that can save a buyer thousands of dollars over the life of their loan.
See what I mean? This mortgage loan has some major benefits for a broad range of buyers.
The One Potential Snag
There's got to be a downside though, right? Well, there is one but it's not nearly as big of a snag as it used to be.
This program was created to help low to moderate income borrowers and they enforced that by having income limits. In July they rezoned the map for this and a significant chunk of our market now has no income limit at all. That means a person could make a bazillion dollars per year and still only put 3% down and get the cheaper PMI if they were buying in one of these newly-expanded areas (although, with a bazillion dollar income, they really should just pay cash).
Some areas still have an income limit though. It's determined by census tract and the map can be easily accessed here - Home Ready Map. For those areas with a limit, it's currently $52,900.
This is the maximum income for the borrower, not the household. This is significant because it gives us a workaround when someone wants to buy in an area with this cap. If there are multiple borrowers, we often can do the loan in just one of their names to stay under the limit while putting them both on the deed to the house.
It's SO Worth ItA first time home buyer will also have to take an online home buyer education class but that and the income limit in some areas are really the only negatives. If a person can work around those, it is SO worth it to get the lower down payment, lower PMI costs and lower interest rate.
So are you interested? Do you want to learn more? Just email me at email@example.com to see if this program is a fit for you.
To learn more about the products covered here or any other aspects of home financing, contact Lori Hiscock at firstname.lastname@example.org.
Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.