Benefits of Fannie Mae’s HomeReady Program

Individuals looking to purchase their primary residence in a lower-income neighborhood, or who qualify as lower income but have good credit, may find the following Fannie Mae program a good fit:

The HomeReady program doesn’t have an income limit for purchasing in lower-income neighborhoods designated by Fannie Mae. This means buyers can qualify for the program with a high income (perhaps making the purchase of a character home in an urban area financially worthwhile).

HomeReady buyers can purchase a variety of home types, including single-family homes, townhomes, condos, and some manufactured homes.

Under the program, you can also purchase a one- to four-unit property with another person, providing at least one of the borrowers lives in the home as his or her full-time residence.

HomeReady’s down payment amount is based on the buyer’s credit score. With very high scores, you may be able to put down as little as 3% of the purchase price for a one-unit property. The down payment may come from your own funds, or in the form of a gift from a close relative. With asset reserves, there are several factors that will determine the amount needed.

Income used to qualify for the property may include boarder income, if you can prove with canceled checks, for example, that the boarder was renting from you in nine of the most recent 12 months.

Many lower down payment borrowers may also consider FHA mortgages, but HomeReady mortgages are much less expensive to own, mostly as a result of the lower cost of mortgage insurance (MI).

MI is insurance for the lender in case a borrower should default, and almost all lower down payment mortgages have this. The difference with a HomeReady loan is that MI can be removed at some point, whereas with FHA, it remains in place for as long as you hold that mortgage.

Need more information? Your mortgage professional can help.

Locking In Your Mortgage Rate Is Not as Easy as It Sounds

As defined in Investopedia, a mortgage rate lock is “an agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate.” However, there’s a bit more to the story.

Offering you a rate lock costs your lender money; by committing funds to lend to you, the lender is unable to use them for anything else until your loan closes.

In other words, that money isn’t making money at that moment. Many lenders are hesitant to do this until they are reasonably sure that the mortgage you are applying for is going to go through.

Things that could happen to stop the home purchase process include many that are not of your making and are outside of your control. These may be unforeseen and may include significant issues with the property you want to buy.

So when should you be locking in a mortgage rate? The truth is that nobody, including your lender, knows what the rates are going to do day to day. As is the case with stockbrokers who watch the market to advise their clients on buying and selling, there is no crystal ball.

The answer is that at some point, probably close to the day of closing, you and your lender will need to make an educated guess. Then do it.

If you have questions, your mortgage professional can explain the lock-in process in greater detail.