[2025 Guide] HomeReady Mortgage: How First-Time Buyers Can Qualify

Buying your first home can feel overwhelming, especially when you’re working with a modest income or limited savings. Thankfully, the HomeReady loan program offers an affordable path to homeownership. Fannie Mae backs this mortgage option to help first-time buyers and low-to-moderate-income families qualify with ease.

Whether you’re part of a multigenerational household, have income from roommates, or simply need a low down payment, HomeReady could be the solution you need.

What Is a HomeReady Loan?

It’s a Fannie Mae backed conventional loan that expands access to affordable housing for buyers with lower income or lesser savings.

This program is ideal for:

• First-time homebuyers
• Multigenerational families
• Buyers using non-traditional income sources
• Borrowers with limited funds for a down payment

HomeReady stands out because it allows more flexibility than many traditional loans, especially when it comes to income and credit requirements.

Key Benefits of a HomeReady Loan

HomeReady offers several advantages that make it one of the most accessible mortgage options available:

• Low Down Payment: You can buy a home with as little as 3% down.
• Flexible Income Sources: Income from boarders or roommates might count toward qualifying.
• Reduced PMI Costs: Private mortgage insurance is required, but the cost is lower than standard conventional loans.
• Lower Credit Score Requirement: typically accepts credit scores as low as 620.
• Homeownership Education: The required course helps you prepare for the responsibilities of owning a home.

Did You Know? HomeReady loans allow non-occupant co-borrowers, like a parent or guardian. That makes it easier for families to support first-time buyers.

Loan Requirements

To qualify for a HomeReady loan, borrowers must meet specific criteria:

• Credit Score: Minimum of 620, though higher scores may get better rates.
• Income Limits: Your income must fall below 80% of the Area Median Income (AMI). Use Fannie Mae’s income lookup tool.
• Occupancy Requirement: You must live in the home as your primary residence.
• Education Requirement: At least one borrower must complete a homeownership course, such as the Framework course.

How to Qualify for a HomeReady Loan

Qualifying for a HomeReady loan involves a few clear steps:

1. Check Your Income: Confirm you fall within the 80% AMI limit for your area.
2. Review Your Credit: Pull your credit report to ensure you meet the score minimum.
3. Get Pre-Approved: Work with a lender that offers this type of loan.
4. Complete the Course: Take and pass a homeownership education course.
5. Submit Documentation: Provide income, employment, and asset documentation.

HomeReady vs. Traditional Conventional Loan

HomeReady vs. FHA Loans: What’s the Difference?

Both HomeReady and FHA loans cater to buyers with limited income or savings, but there are key differences:

• Down Payment: HomeReady requires just 3%, while FHA requires 3.5%.
• Credit Flexibility: FHA may accept scores as low as 580 and potentially even lower, while HomeReady requires 620+.
• Mortgage Insurance: FHA loans include lifetime mortgage insurance (MIP), while borrowers can cancel PMI on HomeReady loans once they reach enough equity..
• Income Guidelines: FHA has no income limits, but HomeReady limits income to 80% of AMI.
• Borrower Flexibility: HomeReady allows non-occupant co-borrowers and roommate income, which FHA does not.

Is It the Right Loan for You?

A HomeReady mortgage could be the right choice if you:

• Want to buy a home with limited savings
• Need to use roommate or boarder income
• Have a decent credit score but not enough for a traditional loan
• Plan to live in the property as your primary home

However, if your income exceeds the AMI limit or your credit score is below 620, you might want to consider an FHA loan or another option.

How to Apply for a HomeReady Loan

Ready to take the next step? Here’s how to apply:

1. Choose a Lender: Work with an experienced lender like Agave Home Loans.
2. Gather Documentation: Include W-2s, pay stubs, tax returns, bank statements, and proof of any non-traditional income.
3. Take the Education Course: Complete the required training before closing.
4. Start the Process: Once you’re pre-approved, house hunting can begin!

FAQs

Can I use gift funds for the down payment?
Yes. Gift funds from family or eligible donors are allowed.

Are HomeReady loans only for first-time buyers?
No. While ideal for first-timers, repeat buyers can also qualify.

Do I need to pay PMI?
Yes, but HomeReady loans offer reduced PMI costs and cancel options once you reach 20% equity.

Can I use a HomeReady loan for a multi-family property?
Yes. You can purchase a 1- to 4-unit property if you live in one of the units.