Fannie Mae is making it easier for low- to moderate-income households to qualify for a mortgage loan. The HomeReady program, to be unveiled in December, will allow lenders to include income from nonborrowers within a household, such as extended family members, toward qualifying for a mortgage loan.
Officials at Fannie Mae said their research indicated that extended households have incomes as stable or more stable than other kinds of households at similar income levels.
Many borrowers live in households that include extended family. That extended family often contributes to the household expenses and finances. Until now that income couldn’t be used to help qualify for a loan. That’s the situation for about 19 percent of African-American households and 24 percent of Hispanic households, according to Jonathan Lawless, Fannie Mae’s vice president for underwriting and pricing analytics.
The move is expected to open up mortgage access to a segment of the population that doesn’t fit the typical family structure and has had trouble obtaining mortgages.
Highlights of the HomeReady Program
- The program is available to both first-time home buyers and repeat homeowners.
- A 3% down payment is required.
- In some cases borrowers who don’t live in the home, such as parents, can contribute income.
- Families with boarders will be allowed to count that rent toward qualifying.
- A homeownership education course is mandatory.
- Property designated as low-income will be available to borrowers at any income level.
- Properties in high-minority census tracts or designated natural disaster areas will be eligible for HomeReady financing at or below 100% of area median income (AMI).
- For properties that aren’t in low-income census tracts, high-minority census tracts or designated natural disaster areas – HomeReady borrowers can only have an income at or below 80% of the AMI.
- Fannie estimates that roughly half of census tracts nationally will be subject to the 100% AMI limit or have no income limit at all.
It is not uncommon in today’s economic reality for some people to live in nontraditional households. Fannie Mae’s HomeReady program reflects the reality in society where more households include multi-generational family members, friends, and even boarders. This move to include household income may prove to open up mortgage access to a segment of the population that has had trouble obtaining mortgages in the past. Get more information at the HomeReady website.