It’s possible: get ready for HomeReady and Home Possible loan options
Here’s why hopeful homebuyers don’t need to panic… despite the Federal Reserve set to hike interest rates for the sixth consecutive time this year.
Right now, loans are becoming more accessible at ReadyPrice HQ. While low- to moderate-income earners, people with disabilities and first-home buyers may feel pushed out of the housing market, this needn’t be the case. At ReadyPrice, interest rates for them are dropping and more borrowers are eligible for mortgages. But to understand how more hopeful homebuyers will be able to work with you as a broker, with these upcoming changes, you need to be familiar with Home Ready by Fannie Mae and Home Possible by Freddie Mac.
While Fannie Mae’s HomeReady and Freddie Mac’s Home Possible loan options sound similar, they are not the same; there’s no better time for brokers to scratch up on understanding the differences between the two and expanding the consumer base to boot.
Why choose Fannie Mae’s HomeReady loan?
Fannie Mae’s HomeReady loan aims to lower the barrier to homeownership for low- to moderate-income borrowers, who might qualify for a mortgage but cannot afford a larger down payment on a home.
Through HomeReady, borrowers can use additional sources of income to qualify for the loan, including non-traditional sources such as gifts, rental income, grants or cash on hand.
Compared with other mortgage options on the market, HomeReady offers low rates, reduced mortgage insurance costs and minimal risk-based price adjustments. In these turbulent economic times, smaller monthly payments can ease the pressure on the borrower’s wallet and help them pay for other things such as food and gas.
Brokers should consider HomeReady if they are searching for a flexible loan option to meet their customer’s unique situations. For those unable to commit to the traditional 20% down payment, HomeReady makes it possible for homebuyers to pay as little as 3%.
HomeReady is the perfect option for borrowers who might have ‘thin’ credit files and have been overlooked previously in the mortgage market. This loan option helps borrowers with less-than-ideal credit scores secure financing to purchase a home. Credit scores as low as 620 are permitted with this loan option, and borrowers can use rent and utility payments as alternative forms of credit history to qualify for this loan.
Before recommending HomeReady as a viable loan option for borrowers, brokers should understand the eligibility requirements that must be met to receive loan approval. A borrower must make no more than 80% of their county’s area median income (AMI). Borrowers are also required to attend homeownership counseling, at a fee, to learn the fundamentals of homeownership.
Homeownership is possible with Home Possible
Freddie Mac’s Home Possible loan option has the same ethos as its Fannie Mae equivalent (in that it allows low- and moderate-income owners to achieve homeownership) but with slightly different requirements.
Like HomeReady, homebuyers can still finance up to 97% of the purchase price of their property with gifts and grants with Home Possible. However, Home Possible differs from its counterpart which allows the down payment for a multi-family unit to be paid with alternative forms of income; HomeReady requires the homeowner to pay the 3% entirely out of their own pocket.
Freddie Mac’s Home Possible loan requires a minimum credit score of 660, slightly higher than HomeReady’s offering. However, brokers should keep in mind that Home Possible is less flexible than HomeReady in terms of what counts as income.
Particularly for multi-family properties, Home Possible has lower reserve requirements and down payments when combined with an Affordable Seconds loan. This can give borrowers the peace of mind that their mortgage rates are on par with others offered in the market.
Home Possible is unique because it allows borrowers handy with construction tools to use sweat equity to help pay for their down payment and closing costs. This is calculated by estimating the total value of the materials purchased and the labor performed. This requires extra work from brokers, lenders and the borrower to certify, but it can broaden the pool of mortgage-ready borrowers.
Similar to HomeReady, borrowers approved for a Home Possible loan must complete a homebuyer's education course, particularly if neither of the buyers has a credit score or if all borrowers are first-time homeowners. This requirement is free, unlike HomeReady’s course.
Get mortgage ready and make mortgages possible with ReadyPrice
Mortgages have evolved over the years and our two financial lending institutions, backed by the US congress, have implemented these branded loan options which help brokers to diversify their portfolios to meet the needs of borrowers weathering the current housing crisis and interest rates. Understanding the benefits of low down payment financing can be key for serving these borrowers and helping them find flexible financing fast.
With the introduction of Fannie Mae and Freddie Mac’s offerings on the ReadyPrice platform, it’s prime time for brokers to start reaching more customers, finding uniquely competitive rates using a platform that makes originating mortgages a breeze.
Brokers use this powerful pricing engine to find and connect with lenders to gather more information about their products (including HomeReady and Home Possible loans) for their customers. ReadyPrice boasts great value for brokers with their education and training resources. Free to access for registered members, here brokers can connect with industry professionals to better educate themselves on unfamiliar products, and the wider market as a whole.
Brokers can use ReadyPrice software to connect directly with lenders without hassle, a middleman or additional cost. Through its people and technology, access affordable rates for low- to moderate-income customers. Crafted for industry professionals, ReadyPrice software ensures simplicity and is flexible for every broker’s needs.
To see what ReadyPrice can do, contact the team and book your free demo. In just 15 minutes, the team can demonstrate all the features you need to start searching for the perfect HomeReady and Home Possible loan options to suit more diverse borrowers in this post-pandemic economy, and beyond.
Written for ReadyPrice December 2022
