3% Down HomeReady Mortgage

Buy a home with only 3%. Learn how.

What is a HomeReady Mortgage?

Nice home with a sold signThe HomeReady Mortgage is a mortgage product provided by Fannie Mae, a government-sponsored enterprise (GSE) that acquires mortgages from lenders to increase homeownership accessibility.

Low- and moderate-income borrowers who would not be eligible for conventional mortgages can benefit from the program.

With the HomeReady Mortgage program, borrowers may put down as little as 3% of the purchase price and have a 45% maximum debt-to-income ratio. Borrowers must fulfill income requirements and have a credit score of at least 620 to be approved. Rental revenue from these units may assist in qualifying for the loan.

The program is also available for multi-unit buildings (1 - 4 units). Additionally, the HomeReady Mortgage program permits gift money for the down payment and non-traditional credit profiles.

First-Time Home Buyer Requirements for a HomeReady Loan

The HomeReady loan is a mortgage option Fannie Mae provides for customers with low to moderate incomes. HomeReady loans do not have any first-time home purchase requirements, unlike other home loans. This means that anybody may apply for a HomeReady loan regardless of their history of home ownership as long as they meet the other eligibility conditions, including income, credit score, debt-to-income ratio, and property type restrictions.

To qualify for a HomeReady loan, you may need to meet additional requirements set by some lenders, so keep that in mind. Get in touch with a local mortgage lender to learn more about the criteria and begin the application process.

Down Payment Requirements for a HomeReady Loan

1-Unit  3% down payment
2-Unit 15% down payment
2-4 Units 25% down payment

HomeReady Interest Rates: Competitive Rates for Low- to Moderate-Income Borrowers

Borrowers eligible for a HomeReady loan may get a reduced interest rate. The interest rates for HomeReady loans are often lower than the interest rates on conventional loans. You can lower the total amount of interest you pay and the amount of your mortgage payment every month.
See today's interest rates

Eligible Property Types for HomeReady Loans

The HomeReady loan permits the following property types:

  • co-op (assuming the unit complies with Fannie Mae's specifications ),
  • investment properties not allowed
  • 1 to 4 unit owner occupied properties,
  • condo (approved),
  • PUD (planned unit development), or
  • one unit manufactured homes (A down payment of at least 5% is required)

Occupancy Requirements for HomeReady Loans: What You Need to Know Before Applying

The property must be owner-occupied and cannot be an investment property. The eligible property types include single-unit family homes, cooperative housing, condominiums, and planned unit developments.

Loan Limits for a HomeReady Loan

The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac determine the maximum amount that can be borrowed to buy a house, known as the conforming loan limit. For 1-unit HomeReady loans in 2023, the lending cap is $726,200. This is the highest amount that can be borrowed for most single-family houses in the contiguous United States. However, loan maximums may be greater in certain high-cost regions such as Hawaii and Alaska.
See Conforming loan limits

Understanding PMI for HomeReady Loans

When you obtain a Conventional 97 loan, you will be required to pay private mortgage insurance (PMI) until you have reached 78 percent equity in the property. Your monthly mortgage payment includes the PMI premium, which is determined as a percentage of the total loan amount. After you have reached 22% equity, your mortgage insurance will be removed automatically.
Read more about private mortgage insurance

Credit score meterCredit Score Requirements for HomeReady Loans

Fannie Mae recommends applicants have a credit score of at least 620 to qualify for a HomeReady loan with a down payment of 3% of the total loan amount. And to access all benefits of the loan, Fannie Mae recommends a credit score of 680 or higher.

Income Limits for HomeReady Loans

The income limits for HomeReady loans depend on the location and number of units of the property. Generally set the income limit is set at 80% of the area median income (AMI), Income tax formsbut in certain high-cost areas, it may be higher. Use the HomeReady Income Eligibility Lookup tool on the Fannie Mae website to find specific income limits for a certain property address. Keep in mind that the HomeReady program also has other eligibility requirements, including credit score and debt-to-income ratio, in addition to income.

Using Gift Funds for a Down Payment on HomeReady Loans

Gift box full of money to buy a houseYou can use gift funds for a down payment (or closing costs) on a HomeReady loan as long as the gift funds are from an acceptable source and are adequately documented.

Allowable sources of gift funds for a HomeReady loan include family members, close friends, and specific nonprofit organizations. Require documentation such as a gift letter verifying that the funds are a gift, not a loan. Include the donor's name, relationship to the borrower, and the gift amount on the gift letter.

To know the specific guidelines on gift funds, check with the lender you're working with.
Read more about gift funds for down payment and closing costs

HomeReady Loan Guidelines for Seller Concessions

The HomeReady loan program allows sellers to offer concessions to buyers based on the down payment amount. For buyers putting down less than 10% on the property, sellers can offer up to 3% of the sales price as a concession toward the buyer's down payment. For buyers putting down 10% or more, sellers can offer up to 6% of the sales price as a concession. It's essential to check with the lender you're working with to know their specific guidelines for seller concessions for HomeReady loans.

Concessions from the seller must be included in the sales agreement..
Read more about seller concessions

Requirements for Homebuyer Education for HomeReady Loans

At least one borrower must take homeownership education if all occupying borrowers are first-time homebuyers, regardless of the loan-to-value ratio. Fannie Mae HomeView™ can fulfill the homeownership education requirement.

Guidelines for Debt-to-Income Ratio for HomeReady Loans

The debt-to-income (DTI) ratio guidelines are an essential factor to consider when applying for a HomeReady loan. The DTI ratio is a calculation that compares a borrower's month-to-month obligations to their gross income.

The HomeReady program, offered by Fannie Mae, has a most extreme DTI proportion of 45%. This implies your month-to-month obligation installments, including your proposed home loan payment, can't surpass 45% of your gross month-to-month income. It's essential to remember that lenders may have their own particular specific DTI guidelines, notwithstanding those set by the HomeReady program.

It's consistently a smart thought to check with your loan specialist to guarantee you meet their prerequisites. Moreover, it's worth mentioning that having a lower DTI ratio can improve your odds of loan endorsement and will help you to get a superior loan fee. 
Read more about debt to income ratios

Qualifying for a HomeReady Loan with a Cosigner

New home buyer receiving the keys to their homeSecuring a HomeReady loan with a co-signer can improve your chances of being accepted, particularly if you have a lower credit score or earnings.

A co-signer is an individual who consents to receive the monetary obligation of the loan with you and should sign all the loan documents. A co-signer has to meet the same income and credit prerequisites as the primary borrower; however, their salary can be utilized to get the loan. With a co-signer, the loan specialist will consider both the borrower's and co-signers pay and credit score, which can help expand the chances of loan endorsement.

It is essential to remember that the co-signer will be similarly liable for the loan. Hence, picking somebody dependable and eager to take on this duty is necessary. Moreover, having a co-signer can help in getting a premium loan cost.

Rotating question markFAQs About the HomeReady Loan

What is a HomeReady loan?
A. A HomeReady loan is a type of mortgage offered by Fannie Mae that is designed to help low-to-moderate income borrowers purchase a home.

Who qualifies for a HomeReady loan?
A. To qualify for a HomeReady loan, borrowers must meet certain income and credit requirements, and the property must be located in an eligible area.

What are the income limits for a HomeReady loan?
A. The income limits for a HomeReady loan vary depending on the location of the property and the number of borrowers on the loan.

What is the maximum debt-to-income ratio for a HomeReady loan?
A. The maximum debt-to-income ratio for a HomeReady loan is 45%.

Can I use a cosigner to qualify for a HomeReady loan?
A. Yes, a cosigner can help increase the chances of loan approval and a better interest rate for a HomeReady loan.

What types of properties are eligible for a HomeReady loan?
Single-family homes, condos, townhomes, and 2-4 unit properties are all eligible for a HomeReady loan.

Is there a minimum credit score required for a HomeReady loan?
A. The minimum credit score required for a HomeReady loan is 620.

Can I use a HomeReady loan to refinance my current mortgage?
A. yes, HomeReady loans are designed for home purchases only.

Are there any special programs available for first-time homebuyers who use a HomeReady loan?
A. Yes, the HomeReady program offers additional assistance for first-time homebuyers such as Homeownership Education and counseling.

What are the benefits of a HomeReady loan?
A. Benefits of a HomeReady loan include lower down payment requirements, flexible credit score and income requirements, and special programs and assistance for first-time homebuyers.


With the help of Fannie Mae's HomeReady Mortgage, borrowers with low and moderate incomes may buy a house with as little as a 3% down payment and a maximum debt-to-income ratio of 45%.

The program enables gift money for the down payment and non-traditional credit profiles, and it has no limitations for first-time homebuyers. In addition to single-family houses, cooperative housing, condos, and planned unit projects are also eligible property types under the program, which is also accessible for multi-unit structures.

The home must, however, be a primary residence and not an investment. HomeReady loans have a $726,200 maximum loan amount in 2023, and borrowers must pay private mortgage insurance (PMI) until they have 78% equity in the home. Fannie Mae recommends a minimum credit score of 620.

HomeReady Mortgage
HomeReady Mortgage Underwriting Methods and Requirements
Frequently Asked Questions

Recommended Reading

  1. What is a Conventional Loan Non-Occupant Co-Borrower?
  2. How to Get a Conventional Loan After Chapter 7 Bankruptcy
  3. Find out the credit requirements for a conventional loan.