Lower-income borrowers will have more competitive options through a new conventional agency program with looser qualifying requirements.
The new program from the Federal National Mortgage Association is being rolled out to replace the secondary lender’s MyCommunityMortgage product.
Fannie Mae said that the program will
fully leverage its integrated suite of risk management tools for greater certainty and efficiency.
The program has been named HomeReady, according to
a news release Tuesday.
Fannie said that the program is intended to help creditworthy borrowers with lower and moderate incomes gain access to an affordable, sustainable mortgage.
The secondary lender’s Desktop Underwriter automatically identifies potentially eligible loans thanks to new HomeReady functionality.
The Washington-based company noted that — for the first time — it will consider income from a non-borrower household member to determine the debt-to-income ratio. This guideline is designed to help multi-generational and extended households qualify for a loan.
Research cited by Fannie suggests that
extended households tend to have incomes that are as stable or more stable than other households at similar income levels.
In addition, income from non-occupant borrowers, like parents and rents collected, will be allowed.
Borrowers located in designated low-income census tracks will not have any income limitations.
In areas with high-minority census tracts or designated natural disaster areas, borrowers’ income cannot exceed the area median income.
In all other areas, borrower income is limited to 80 percent of the area median income.
Down payments are as low as three percent for
first-time and repeat homebuyers.
Fannie Mae Vice President for Underwriting and Pricing Analytics Jonathan Lawless noted in the announcement that the product is competitively priced.
“We are also confident this mortgage option will create business opportunities for lenders serving the changing demographics and borrower needs seen in today’s market,” Lawless said. “The combination of our risk management safeguards and an innovative online education tool will put HomeReady borrowers in a strong position to succeed in homeownership.”
Standard loan-level pricing adjustments are either eliminated or limited under the program.
Borrowers are required to complete
an online education course intended to prepare them for the home buying process. The course also provides post-purchase support for sustainable homeownership.
Fannie promises more program details in the coming weeks.
DU is expected to include HomeReady guidelines later this year.
Fannie expects to begin taking delivery of HomeReady loans also later this year.
