Home Ready

What is a HomeReady Mortgage?

What is a HomeReady Mortgage?

Sometimes, homebuyers need help from other people for funding a home purchase. Some people rely on family or friends to make a down payment. Others depend on a relative, spouse, or significant other to co-sign to get approval.

If you are one of those scores of people who are in the same situation, a HomeReady loan might be right for you because it is more flexible about allowing contributions from other people.

So, what is a HomeReady loan?

A HomeReady mortgage is a conventional, yet flexible, home loan offered by Fannie Mae. It is meant to help low-income to moderate-income borrowers buy for the first time or refinance an existing loan.

You are an ideal HomeReady borrower if you have low income, are a first-time or repeat homebuyer, and have limited cash for down payment.

HomeReady loans reduce the typical down payment and mortgage insurance requirements.

It also allows family members or friends to co-sign to help get approval. So it is good for prospective buyers relying on others to help fund their home purchase.

Additionally, cash gifts from a relative, spouse, or significant other can be used for down payments. Furthermore, down payments can be as low as 3%.

HomeReady is relatively new, but it has already helped thousands of borrowers secure the home of their dreams and keep money in their pockets at the same time.

“HomeReady has already helped thousands secure the home of their dreams and keep money in their pockets at the same time.”

 

What is the benefit of HomeReady mortgages?

What is the benefit of HomeReady mortgages?

Here are some advantages or benefits of a HomeReady mortgage:

 

  • Secure Approval with Co-BorrowersHomeReady mortgages are flexible in allowing large contribution from others to fund the costs of the loan, like the down payment and closing. Other conventional home loans are not as flexible as approval is based only on the borrower’s personal income.Fannie Mae allows co-borrowers to add their financial support to the approval process. This means that your relatives can help your chances of securing an approval even if those relatives are not planning on living in the house you are purchasing.There is no minimum for your personal contribution. You can fund your whole HomeReady loan from a gift.

 

  • Get Approved with Help from Income of Other People Living in Your HouseIf you don’t have a co-borrower, HomeReady loans will allow the income of people living with you to be added as compensating factors.Their incomes will not be added to yours in the approval process. However, their incomes will matter in situations where your debt-to-income ratio is higher than normal.Family members, roommates, boarders will only need to prove that they have been living with you for at least a year.Additionally, if the new house you are purchasing has space for a tenant, you can add the estimated rent as part of your income in the HomeReady loan application.
  • Lower Down PaymentHomeReady mortgages make home buying easier because of lower minimums for down payment and credit score requirements.Fannie Mae allows a loan-to-value, or LTV, ratio of up to 97% for HomeReady mortgages on single family units. This means down payments as low as 3%. This is even lower than the minimum down payment for an FHA loan, which, even with the government backing the lender, is usually 3.5%.
  • Affordable Mortgage Insurance PremiumsHomeReady loans help you minimize and even eliminate the mortgage insurance premiums faster.With HomeReady, you may have the option to cancel your mortgage insurance as soon as the home equity reaches 20%. This means lower monthly payments later on. However, there are restrictions that apply to this.Fannie Mae doesn’t include the upfront premium as part of the HomeReady closing costs. You can therefore put more into your down payment. This can potentially increase the amount you can afford to borrow.

Call Secure Choice Lending at 951-733-8925 for more details on the benefits and advantages of HomeReady mortgages.

 

HomeReady loans vs. FHA loans

 

HomeReady FHA
Down payment requirement 3% 3.5%
Lender can order appraisal immediately Yes No
Geographic restrictions on loan amounts None Restrictions apply
Mortgage insurance can be cancelled (restrictions apply) Yes No

Is HomeReady only for first time home buyers?

No, you don’t have to be a first-time homebuyer to qualify for a HomeReady loan.

However, there are other requirements you have to meet.

 

How do I qualify for a HomeReady loan?

How do I qualify for a HomeReady loan?

  • You must have a minimum credit score of 620.If you have a credit score greater than or equal to 680, you may get an even better deal.
  • Your income must be less than or equal to the Area Median Income (AMI).You can look up the AMI of your home address on Fannie Mae’s HomeReady eligibility page. You may be qualified as long as your personal income is not higher than the AMI for the address of the house you want to buy or refinance. If you live in a low-income area, you may not have to worry about income limits.
  • You must only use a HomeReady loan for a primary residence.

 

  • You must take homeownership courses.The classes are provided online and can be completed in only four hours so it is not too much of an inconvenience.

 

Secure Choice Lending can help you with a HomeReady loan

Secure Choice Lending can help you with a HomeReady loan

HomeReady mortgages make home buying easier. And Secure Choice Lending is here to make the process even simpler.

Call Secure Choice Lending at 951-733-8925 today for your HomeReady mortgage.

“Secure Choice Lending will make your HomeReady loan application process simple.”

Our Loan Officers will be happy to answer all your questions and discuss your options until everything is clear to you.

Secure Choice Lending is a full service mortgage broker that will secure you a mortgage that doesn’t break the bank.

To streamline the lending experience, our team of financial experts matches consumer needs with the appropriate loan programs and level of risk. With loan officers versed in all mortgage types, solutions to your home-buying questions are a phone call away.

 

Click here to request a quote.

Click here to leave us a message.

Click here to call us directly from your mobile.

Conventional Loans

What is a Conventional Loan? (2019 Guide)

What is a Conventional Loan

What does your dream home look like?

How many bedrooms does it have? What kind of flooring are you walking on? How do the windows look? Are those granite countertops or marble? Does the patio have enough space for you to lounge on a lazy Saturday afternoon?

Is that a kids playset in the backyard? Do you have a pool or a treehouse?

Now, take a step back, and what you probably didn’t imagine in that moment of bliss is the homebuying process: the loan application, the various loan types, the requirements and, lastly, how or where to begin.

And that’s OK! You are not alone.

A majority of prospective homeowners have questions about the buying process. What separates them is who they turn to for assistance.

So what do you do? Where do you start?

What you need is clarity.

Support.

Answers.

What you need is Secure Choice Lending.

Call our office at (951) 707-9364 to solve your questions and assuage your concerns.

Still not convinced? This page explains the most popular home loan: conventional.

What is a conventional loan?

conventional loan

A conventional loan is a mortgage that is not guaranteed or insured by the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA) or any other government agency.

These loans are geared toward borrowers with higher credit scores and, at times, larger available funds for a down payment (typically 5-20%).

Conventional loans have products that provide borrowers more flexibility. Additionally, private mortgage insurance, or PMI, is removed at an LTV (loan-to-value) ratio of 80% or less.

It is likely you have heard of conventional loans before, either from your own research or a lender’s recommendation. This is because conventional loans are more commonly used than other government-guaranteed loans, such as FHA loans and VA loans.

In fact, according to the government census, conventional loans were used for 75% of all new home sales in the last quarter of 2018(1).

Simply put. it is the most widely used loan option.

What are the benefits of a Conventional Loan?

If you have a high credit score, and you have saved enough to make a down payment of up to 20%, a conventional loan is likely the right choice for you.

There are many benefits to conventional loans

There are many benefits to conventional loans, for instance:

  • Even if you have less than 20% to put toward a down payment, there is no upfront mortgage insurance fee. Government-backed loans require an upfront funding fee of about 1-3% of the total loan amount.
  • If you can put 20% down, you are not required to get mortgage insurance.
  • Interest rates are low.
  • Fixed-rate mortgage loan options have term lengths ranging from 10 to 30 years.
  • If you are not long for your new home, the adjustable-rate mortgage loan option is available. It has a lower interest rate than the fixed-rate loan option.
  • Because conventional loans are not backed by the government, there are less restrictions than their government-backed peers. For example, conventional loans can be used to purchase a primary residence, a secondary home, a vacation property or a rental property. Government-backed loans can only be used to buy a primary residence.

 

What are the different types of conventional loans?

What are the different types of conventional loans?There are two types of conventional loans.

  1. Conforming Conventional Loan

Conforming conventional loans have terms and conditions that must meet the funding criteria of Fannie Mae and Freddie Mac.

Fannie Mae, or the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corporation, are government-sponsored entities that purchase mortgages from private lenders.

One key condition that Fannie Mae and Freddie Mac imposes is the loan limit. Conforming loans must not exceed the loan limit set every year by the Federal Housing Finance Agency, or FHFA.

fhfa sells the maximum conforming loan limits

According to the FHFA, the maximum conforming loan limit for 2019 for one-unit properties in most of the U.S. is $484,350. You can click here to see a map that shows the 2019 maximum loan limits across the U.S.

Call Secure Choice Lending at (951) 707-9364 to learn what the conforming loan limits are in your area.

  1. Non-conforming Conventional Loan

Conventional loans that exceed the set loan limit are considered non-conforming conventional loans. Also referred to as Jumbo Loans, non-conforming conventional loans are not purchased by Fannie Mae or Freddie Mac because they exceed the loan limit.

Non-conforming loans are funded by private institutions or lenders.

For questions about higher loan limits that exceed the amount set by FHFA, call Secure Choice Lending at (951) 707-9364.

Conventional Loan Rates

Conventional loans make home-buying affordable for many people because of their low interest rates.

Conventional loans make home-buying affordable for many people because of their low interest rates.

Interest rates for these loans change daily, sometimes on an hourly basis, because they are based on mortgage-backed securities (MBS) and are traded just like stocks, which fluctuate throughout the day.

When financial news hits the market, these rates go up or down, depending on the news.

Borrowers who are already approved and already have a property selected can lock in the lowest rates when rates go down.

Your credit score is paramount when applying for a conventional loan.

A high credit scores means a low interest rate.

A low credit score means a high one.

It’s that simple.

Published rates usually are based on the ideal borrower — that is, one with a high credit score and funds available for a 20% down payment. That said, it is best to talk to a loan officer about interest rates.

Call Secure Choice Lending at (951) 707-9364 to get a quote based on your information, not an ideal borrower’s.

How do you qualify for a conventional loan?

How do you qualify for a conventional loan?You could be eligible for a conventional loan if you meet the following requirements:

  • Ideally, you have a credit score of at least 620. Some lenders set a higher minimum credit score requirement. After all, they are taking a greater risk. If you have a lower credit score, you may want to apply for an FHA loan instead.
  • You must be able to provide proof of income, including, but not limited to, recent pay stubs, W2s and tax returns.
  • Your assets must reflect that you have sufficient available funds for the down payment and other closing costs.

Conventional Loan Options and Your Down Payment

While there are no down payment guidelines or standards that lenders must abide by, the size of your down payment will affect the interest rates on your loan, as well as the final loan costs.

Conventional Loan Options and Your Down Payment

Conventional loans typically require a higher down payment when compared to government-backed loans. Most lenders will ask you to put 5% down. However, you can put 10% or 20% down.

For large loan amounts, be prepared to provide an even higher down payment.

For large loan amounts, be prepared to provide an even higher down payment.

A large down payment will result in lower monthly mortgage costs. Moreover, a down payment of at least 20% on a conventional loan eliminates mortgage insurance, a perk that is not available for government-backed loans, which require borrowers pay mortgage insurance regardless of how much they put down.

Secure Choice Lending can Assist you with a Conventional Loan

Secure Choice Lending can Assist you with a Conventional LoanThere’s myriad information on conventional loans, and we know taking it all in at once can be pretty overwhelming.

But don’t panic!

Our loan officers are happy to answer all your questions and discuss your options.

Secure Choice Lending is a full-service mortgage broker that will secure you a mortgage that doesn’t break the bank.

To streamline the lending experience, our team of financial experts matches consumer needs with the appropriate loan programs and level of risk. With loan officers versed in all mortgage types, solutions to your home-buying questions are a phone call away.

 

Click here to request a quote.

Click here to leave us a message.

Click here to call us directly from your mobile.