Selling Guide

Published August 29, 2017

General Loan Eligibility

A HomeReady mortgage is a first mortgage, purchase money, or limited cash-out refinance transaction for one- to four-unit properties used as the borrower’s principal residence.

Eligible properties include:

  • one-unit properties, including manufactured housing, and units in condos and PUDs;

  • units in co-ops, provided the unit conforms to Fannie Mae's requirements, and the lender has received specific authority to deliver mortgages on co-ops to Fannie Mae;

  • existing structures and new construction; and

  • two-, three-, and four-unit properties.

Additional restrictions apply to transactions with LTV, CLTV, or HCLTV ratios of 95.01 — 97%. See below for additional requirements for HomeReady mortgage transactions.

Maximum LTV, CLTV, and HCLTV Ratios

Refer to the Eligibility Matrix for maximum allowable LTV, CLTV, and HCLTV ratios for HomeReady mortgage loans. HomeReady loans that are originated in connection with the HomeStyle Renovation product or secured by manufactured housing must follow the more restrictive LTV, CLTV, and HCLTV ratios that apply. For example, the maximum LTV, CLTV, and HCLTV ratio for a one-unit HomeReady manufactured home is 95%.

Requirements for HomeReady Transactions with LTV, CLTV, or HCLTV Ratios of 95.01 – 97%

If the LTV, CLTV, or HCLTV ratio exceeds 95% for a HomeReady transaction, the following requirements apply.

Criteria Requirements
LTV, CLTV, or HCLTV Ratio 95.01 to 97%

Note: The CLTV ratio can be up to 105% if the subordinate lien is a Community Seconds loan.

Loan Purpose Purchase transactions or limited cash-out refinances only.
Existing Loan For limited cash-out refinances:

The lender must document that the existing loan being refinanced is owned (or securitized) by Fannie Mae. Documentation may come from

  • the lender’s servicing system,

  • the current servicer (if the lender is not the servicer),

  • Fannie Mae’s Loan Lookup tool, or

  • any other source as confirmed by the lender.

The lender must inform DU that Fannie Mae owns the existing mortgage using the Owner of Existing Mortgage field in the online loan application before submitting the loan to DU.

Note: This requirement does not apply if the CLTV exceeds 95% only due to a Community Seconds loan.

Loan Type Fixed-rate loans with terms up to 30 years.

Note: High-balance, adjustable-rate, HomeStyle Renovation, and HomeStyle Energy loans are not permitted.

Property and Occupancy One-unit principal residence. All borrowers must occupy the property.

Manufactured housing is not permitted.

Credit Score Requirements At least one borrower on the loan must have a credit score.
Underwriting Method DU only
Reserves Reserves requirements will be determined by DU.
Other All other standard purchase and limited cash-out refinance and HomeReady requirements apply.

Subordinate Financing

Subordinate financing must comply with:

Subordinate financing from a seller-held mortgage is not permitted with HomeReady mortgages.

Eligible Loan Types

HomeReady mortgage transactions can be secured by fixed-rate or ARM loans.

The following table identifies the ARM plans that are available for HomeReady mortgage loans by delivery method.

ARM Plans Eligible for HomeReady Mortgages
ARM Plans Eligible for MBS Delivery
30-year Five-Year ARMs 659, 660, 661, 2724, 2725, 3846
Seven-Year ARMs 750, 751, 2726, 2727
Ten-Year ARMs 1423, 1437, 2728, 2729
ARM Plans Eligible for Whole Loan Delivery
30–year Five-Year ARMs 2725
Seven-Year ARMs 2727
Ten-Year ARMs 2729

Temporary Buydowns

The following requirements apply to temporary interest rate buydowns on HomeReady mortgages:

  • Loans must be purchase transactions.

  • Loans must be fixed-rate or seven- or ten-year ARMs.

  • All other standard buydown policies apply.

See B2-1.3-05, Temporary Interest Rate Buydowns, for additional information.

Borrower Income Limits and Calculations

In determining whether a mortgage is eligible under the borrower income limits, the lender must count the income from all of the borrowers who will sign the mortgage note, to the extent that the income is considered in evaluating creditworthiness for the mortgage loan.

The lender must use the same methodology in determining income eligibility for a HomeReady mortgage as the lender uses in reporting “Monthly Income” in data delivery. Eligibility for a HomeReady mortgage loan compares the borrower’s income to the applicable area median income (AMI) for the property’s location. For determining Fannie Mae loan eligibility, lenders must refer to the AMIs that Fannie Mae uses in Desktop Underwriter or on Fannie Mae’s website, and may not rely on other published versions (such as AMIs posted on huduser.org).

To be eligible as a HomeReady mortgage, the total annual qualifying income may not exceed 100% of the AMI for the property’s location. However, there is no income limit for properties located in low-income census tracts, defined as those census tracts where the median tract income is no greater than 80% AMI.

Note: For loan casefiles that are not underwritten as a HomeReady mortgage loan, DU will issue a message indicating that the loan may be eligible as a HomeReady loan if the total qualifying income entered in DU appears to be within the applicable AMI limit or the property is located within a low-income census tract. See B5-6-03, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.

Homeownership Education and Housing Counseling

Homeownership education is required for all HomeReady purchase mortgage loans. Refer to B2-2-06, Homeownership Education and Housing Counseling, for options for meeting this requirement.

HomeReady loans for which at least one borrower completed housing counseling as an alternative to homeownership education, evidenced by a signed Certificate of Completion of Housing Counseling (Form 1017), are eligible for certain benefits. See B5-6-03, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2017-06 July 25, 2017
Announcement SEL-2017–02 February 28, 2017
Announcement SEL-2016–08 October 24, 2016
Announcement SEL-2016–07 August 30, 2016
Announcement SEL-2016–06 July 26, 2016
Announcement SEL-2016–05 June 28, 2016
Announcement SEL-2015–12 November 3, 2015
Announcement SEL-2015–10 September 29, 2015
Announcement SEL-2015–01 January 27, 2015
Announcement SEL-2014–07 June 24, 2014
Announcement SEL-2013–06 August 20, 2013
Announcement SEL-2012–07 August 21, 2012
Announcement SEL-2012–06 June 26, 2012
Announcement SEL-2011–09 August 30, 2011
Announcement SEL-2011–05 June 28, 2011
Announcement SEL-2011–03 March 31, 2011
Announcement SEL-2010–16 December 1, 2010
Announcement SEL-2010–06 April 30, 2010
Announcement 09-19 June 8, 2009