Mortgage Moment: Fannie Mae 3% down HomeReady program

Fannie Mae is now offering HomeReady, an alternative conventional program designed for creditworthy, low- to moderate-income borrowers. Typically, conventional loans require 5% down but borrowers are only required to put 3% down with Fannie’s HomeReady program. Homeownership education is required for first-time homebuyers.

Borrower Benefits:
• Low down payment- 3% minimum
• Move-up buyers qualify, in addition to first-time homebuyers
• 100% Gifting may be used for the down payment and closing costs with no minimum contribution required from the borrower’s own funds.
• Reduced Private Mortgage Insurance (PMI) rates
• Seller-Paid closing costs allowed

HomeReady vs FHA:
• Lower PMI for borrowers with a higher FICO Score (720 and higher)
• PMI can be dropped with HomeReady but not FHA
• Only requires 3% down rather than 3.5%
• No upfront PMI unlike FHA with a 1.35% funding fee