Loans Buy a home HomeReady
HomeReady: buy with 3% down and lower mortgage insurance
This is Fannie Mae's conventional loan for buyers with low to moderate income. It offers a small down payment, lower-cost mortgage insurance than standard low down payment loans, and more ways to count household income.
New to this loan? Start here: How much you need saved A 3-minute lesson
Who it fits
HomeReady is for buyers with steady income and reasonable credit who do not have a large down payment saved. You do not have to be a first-time buyer. If you have owned a home before, you can still use it as long as your income is within the limit for the area.
In Southwest Colorado, the limit for a home in Cortez can differ from one in Durango or Pagosa Springs, because income limits are set by location. We check the exact address before you make an offer. Homes on small acreage, with a well or septic, work with HomeReady when the property meets Fannie Mae’s guidelines.
Income that can count
HomeReady reflects the way many households live. Along with your own pay, a lender may be able to count:
- Boarder income: rent from someone who lives with you, such as a relative or roommate, when it is documented.
- Rental income from an accessory unit: a casita or apartment on the same property.
Each has documentation rules. We will tell you up front what counts in your case.
HomeReady or FHA?
Both are built for small down payments. The right one depends on your credit, your income and how long you plan to keep the loan.
| Feature | HomeReady | FHA |
|---|---|---|
| Minimum down | 3% | 3.5% |
| Mortgage insurance | Can be canceled as equity builds | With under 10% down, stays for the life of the loan |
| Upfront insurance fee | None | 1.75% of the loan, usually added to it |
| Income limit | 80% of area median | None |
| Credit | Works best with stronger credit | More flexible |
See also Home Possible, Freddie Mac's version of the same idea, and FHA purchase loans.
Calculators and guides
- Mortgage payment calculatorYour full payment for each loan type, and where any payment goes.
- HomeReady: the 3% down loan to know aboutA closer look at HomeReady
- Best mortgages for first-time buyers in Southwest ColoradoHow the low-down options compare here
- Down payment by loan typeThe down payment, loan and cash to close on each loan type.
- When mortgage insurance comes offWhen conventional mortgage insurance comes off, and how FHA differs.
Common questions
Is HomeReady only for first-time buyers?
No. Repeat buyers can use it too, as long as household income is within the limit for the area.
What is the HomeReady income limit in Southwest Colorado?
It is 80% of the area median income, and it is set by location. Look up an exact address with Fannie Mae's lookup tool, or send us the address and we will check it.
Can a roommate or relative's rent help me qualify?
Often, yes. Documented rent from a boarder, or from an accessory unit on the property, can count toward qualifying income.
When does the mortgage insurance come off?
You can ask to cancel it once your balance reaches 80% of the original value, and it ends automatically at 78% if you are current. The CFPB explains the rules.
HomeReady or FHA: which costs less?
With good credit, HomeReady usually costs less over time because its mortgage insurance can be canceled and there is no upfront premium. With lower scores, FHA can cost less. Your Mortgage Plan shows both.