Fannie Mae’s HomeReady mortgage is a home loan program geared toward low-to-moderate-income borrowers.
The program offers low-cost loans to borrowers who meet income limits and credit requirements. Borrowers who make less than 80% of their area’s average median income can secure a loan requiring down payments as low as 3%.
Home prices are higher than ever in 2025, and prospective buyers are always looking for ways to manage costs. If you meet the income limits, you can secure a HomeReady loan with lower minimum requirements than other types of conventional loans.
This guide will cover how the HomeReady mortgage program works and who qualifies. We will also discuss HomeReady income limits and walk you through the application process.
You can search lenders to find the best HomeReady mortgage opportunities. Need an agent to help you find homes in your price range and negotiate a winning offer? Find an agent in your area who's worked with HomeReady mortgages by using Clever.
Why choose a HomeReady mortgage?
Fannie Mae HomeReady mortgages are for buyers with below-average incomes, but they also carry other advantages.
Below are some of the main reasons you should consider getting a HomeReady mortgage:
- Low down payments: HomeReady loans can have down payment requirements as low as 3%.
- Flexible income source: HomeReady loans allow more flexible sources of mortgage income, such as boarders and co-borrowers. Parents and family members can be co-borrowers, even if they are not going to live in the home.
- Cancelable PMI: Once you meet the 20% equity threshold, you can cancel your private mortgage insurance.
- Lower mortgage premiums: HomeReady loans typically have lower mortgage insurance costs than other conventional loans or FHA loans.
- No minimum borrower contribution: If you are purchasing a single-unit home or if the loan-to-value (LTV) is 80% or less, you do not have to make a minimum contribution. However, if a grant is used for closing costs, you must make a minimum 3% contribution from your own funds.
- Grants and assistance available: First-time borrowers with especially low incomes may qualify for additional grants and assistance to cover closing costs and other loan fees.
Who it helps most: First-time buyers, single parents, households with income they can pool to buy.
HomeReady mortgage requirements and eligibility
To qualify for a HomeReady mortgage loan, you must meet Fannie Mae’s income limits and financial requirements. Note that these are the minimum guidelines for lenders, and actual approval requirements can vary from lender to lender.
Income limits
Generally, you must make less than 80% of the area median income (AMI) to be eligible for a HomeReady loan. So, for example, if the AIM is $100,000/year, you must earn less than $80,000/year to be eligible.
Fannie Mae updates AIM values using data from the Department of Housing and Urban Development. You can search your region’s income limits with Fannie Mae’s AMI lookup tool. Note that there are no income limits in certain low-income regions.
Credit score & history
Fannie Mae set a minimum FICO credit score of 620 for HomeReady loans. Even though the minimum required score is 620, you can get better loan terms with a credit score of 680+. Lenders will consider borrowers with a non-traditional credit history if they demonstrate they can meet loan obligations.
Debt-to-income (DTI) ratio
DTI ratio limits are typically 45% for manually underwritten loans, but can reach as high as 50% when using Fannie Mae’s Desktop Underwriting (DU) automated underwriting tool.[1]
For example, if your monthly income is $6,000 and your total monthly debts (plus projected housing costs) are $2,400, your DTI would be $2,400/$6,000 = 40% — right in the qualification range for most lenders.
Property and occupancy requirements
HomeReady mortgage loans are offered for single-unit homes that the owner occupies as their primary residence. Options for multi-family units, condos, and co-ops are also available, though they will have stricter credit requirements.
To count as a primary residence, the owner must move into the home within 60 days of closing. Note, however, that co-signers on the loan do not necessarily have to occupy the home as their primary residence.
Education requirement
If you are a first-time buyer applying for a HomeReady loan, you must fulfill Fannie Mae’s homeowner education requirements.
For example, you can take a Framework homebuyer education course that takes 4–6 hours and costs $75. You’ll receive a certificate after completion to prove your eligibility.[2]
HomeReady loan features and guidelines
As with its other loan products, Fannie Mae sets minimum conditions and other guidelines for loans they purchase and back. The HomeReady program offers traditional fixed-rate loans as well as ARM options in line with the standard ARM plan matrix.[3]
Down payment and funding sources
There is a minimum down payment requirement of 3% on HomeReady loans. There is no minimum contribution, so borrowers can use gift funds to cover closing costs. You can also use grant funds to cover down payment costs.
For example, low-income borrowers can receive a one-time $2,500 credit to cover closing costs/down payment.
Private mortgage insurance (PMI)
Like other conventional loans, Fannie Mae requires private mortgage insurance (PMI) for loans with a down payment lower than 20%. However, HomeReady loans offer lower PMI coverage levels than conventional loans.
You also do not have to make an upfront mortgage premium payment when closing, and you can cancel PMI once you reach the 20% equity threshold.
Loan-to-value (LTV) and rate info
HomeReady loans can reach a loan-to-value of up to 97%, depending on whether your lender uses Desktop Underwriter or manual underwriting. For a limited cash-out refinance, LTV can go up to 95%.
For 2-unit loans, LTV maximums for manually underwritten loans are 85%, and maximums for 3–4 unit manually underwritten loans are 75%. These LTV thresholds are for both fixed-rate and adjustable-rate mortgages.
HomeReady loans are competitive with other conventional loans, so you may be able to get additional benefits and pricing adjustments for loans with an LTV lower than 80%.
Closing costs and cash to close
Closing costs for HomeReady loans typically fall between 2% and 5% of the purchase price. Fannie Mae allows borrowers to use down payment assistance (DPA) funds or sellers’ concessions to cover closing costs.
Flexible income options that make qualifying easier
One of the main features distinguishing the HomeReady mortgage program from other loans is that it allows more flexible approved sources of income. Buyers can use a variety of income types to lower their DTI and improve approval odds:
- Co-signers and co-borrowers can include their income even if they don’t live in the house as their primary residence. Lenders may also consider the income of household members not on the loan.
- If you have a roommate who pays rent for at least 12 months, you can include that boarder's income. You can also include rental income from ancillary units — e.g., additional dwelling units (ADUs). You’ll need records of rental payments to add them to your income.
- In addition to regular wages and salary, you can include various nontraditional sources of money, such as child support, alimony, and irregular gig work.
The flexible income options can boost your buying power and greatly increase your chances of loan approval!
HomeReady vs. other low-down-payment mortgages
HomeReady loans can be a good match for some people, but other loans might be a better fit for others. Here’s how a HomeReady loan stacks up against other popular low-down payment loans for borrowers with moderate income.
FHA
FHA loans are backed by the Federal Housing Administration and require a minimum down payment between 3.5% and 10%.[4]
Most FHA loans have a 43% DTI ratio limit that can extend to 50% in extenuating circumstances. You also cannot cancel mortgage insurance if you put down less than 10%. If you put down more than 10%, mortgage insurance will be cancelled automatically after 11 years.[5]
VA
VA loans do not have any down payment minimums, mortgage insurance requirements, or income limits. However, they do have residual income limits you must meet.[6]
USDA
USDA loans typically have no down payment requirements, but they are available in a relatively limited number of rural areas.[7]
Home Possible
Freddie Mac Home Possible loans offer virtually identical requirements and guidelines to HomeReady loans.[8] However, Home Possible loans do not have a set minimum credit score requirement.
| Loan Type | Down Payment | Credit Score Minimum | Max DTI Ratio | Income Limit | Requires Mortgage Insurance? |
|---|---|---|---|---|---|
| HomeReady | 3% | 620 | 43–50% (with DU) | 80% AMI | Yes (cancellable after 20% equity) |
| FHA | 3.5%--10% | 550 | 43% | No limits | Yes (non-cancellable |
| VA | 0% | No minimum | No maximum | Residual income limits | No (one-time funding fee) |
| USDA | 0% | No minimum | No maximum | By state[9] | No (one-time funding fee) |
| Home Possible | 3% | 660 | 43–50% | 80% AMI | Yes (cancellable after 20% equity |
Comparing each loan type directly to Fannie Mae HomeReady mortgages:
- FHA vs. HomeReady: HomeReady loans win out because you can cancel mortgage insurance after a certain equity threshold.
- VA vs. HomeReady: VA loans are specifically for veterans and are best for eligible military borrowers.
- USDA vs HomeReady: HomeReady loans allow more property types as USDA loans are primarily for rural homes and renovations.
- Home Possible vs. HomeReady: Home Possible loans have slightly stricter credit requirements than HomeReady loans.
How to apply for a HomeReady mortgage
Below is a step-by-step guide to applying for a HomeReady mortgage:
- Check eligibility: The first step is checking eligibility by looking at your income, credit score, DTI, and other financial qualifications.
- Complete education: If you are a first-time homebuyer, you’ll first have to complete a homebuyer education course to be eligible.
- Choose an approved lender: Many large banks and online lenders are approved to offer HomeReady loans, and you can search lenders using Fannie Mae’s lookup tool.
- Submit documents: Once you find a suitable lender, you’ll need to provide financial documentation (e.g., W-2s, pay stubs, 1099s, asset sheets, etc.).
- Get preapproved: You can get preapproval for a loan through Fannie Mae’s Desktop Underwriter tool, which your lender can access.
- Shop rates: You should always shop around and compare lenders to get the best rates. Many lenders are willing to match lower rates from their competitors, so take your time and consider multiple options.
- Close the loan: Once you close the loan and pay any closing costs, you have 60 days to occupy the property as your primary residence.
Clever's agent network can connect you with trusted pros who specialize in helping buyers navigate affordable programs like HomeReady.
Pros and cons of HomeReady mortgages
Make sure you understand the pros and cons of HomeReady mortgages before applying. For some, the pros outweigh the cons. However, you should always compare quotes from multiple lenders to assess your options.
Pros
- 3% down payment
- Income flexibility
- Lower PMI requirements
- DPA grants
Cons
- Income limits.
- Primary residence only
- Educational course
- Manual underwriting more restrictive
✅ Pros
HomeReady loans only require a 3% down payment, which is among the lowest down payment requirements for mortgages. You can include a wider range of income types when applying for a HomeReady loan.
PMI requirements are also lower for HomeReady loans, and PMI is cancellable once the loan balance reaches 80%. There are grants available for borrowers with income 50% below the area’s AIM.
❌ Cons
HomeReady loans are for lower-income borrowers, so you have to make under 80% of the area’s median income. They are restricted to primary residences, so they don’t allow investment or vacation properties.
First-time homebuyers must take an educational course to qualify for a HomeReady loan. And credit and financial requirements for manually underwritten loans are stricter (e.g., lower maximum LTV).
📝 Summary and next steps
With a 3% down payment and flexible income options, the HomeReady loan program can be a great option for low-to-moderate-income borrowers.
Basic credit requirements include a FICO credit score of at least 620 and a maximum DTI between 45% and 50%, depending on the type of underwriting. You can also cancel mortgage insurance once your loan balance reaches 80% of the loan’s original value.
Using Clever, you can compare HomeReady lenders and get matched with local experts. You may also qualify for cash back on closing!
FAQ
Is HomeReady for first-time buyers only?
No, HomeReady loans are open to first-time and repeat buyers who meet the income limits and credit requirements.
What are the 2025 income limits?
2025 income limits for the HomeReady program are typically set at less than 80% of your area’s average median income (AMI).
What credit scores do I need for a HomeReady mortgage?
Fannie Mae requires a minimum credit score of 620 for HomeReady mortgages. 620 is the minimum qualification, but you can get better loan terms with a higher score.
Can I refinance into a HomeReady loan?
Yes, you typically can refinance from a loan into a HomeReady loan. A HomeReady loan can be a great idea if you want to refinance from an expensive adjustable-rate mortgage (ARM) to a fixed-rate mortgage with regular payments.
Does HomeReady require PMI?
Yes, you will be required to purchase private mortgage insurance with a HomeReady loan if your down payment is less than 20% of the home’s value.
How is HomeReady different from Home Possible?
Freddie Mac’s Home Possible loan is extremely similar to Fannie Mae HomeReady loans, except Home Possible loans do not specify a minimum credit score.
What are the closing costs for HomeReady?
Closing costs for HomeReady loans typically range between 2% and 5% of the total loan value, though numbers can differ depending on the specific lender.
How do I find HomeReady lenders near me?
You can use Fannie Mae’s lender lookup tool to find participating lenders in the HomeReady loan program.[10]
What are the drawbacks of a HomeReady mortgage?
The main drawback of a HomeReady mortgage is the income limits. In areas with high housing costs, it can be difficult to find a home that both meets the borrowing limits and that you’ll be able to afford while meeting income limits.