KenWiedemann/Getty Images
Key takeaways
HomeReady mortgages are a type of conventional loan backed by Fannie Mae for lower-income borrowers.
The HomeReady program includes a low 3% down payment and reduced mortgage insurance premiums, and allow rental income to be included in the loan application.
To qualify for a HomeReady loan, your income can’t exceed more than 80 percent of your area’s median income.
What is a HomeReady mortgage?
A HomeReady mortgage is a type of conventional loan that helps lower-income borrowers buy homes or refinance. To qualify, your income can’t exceed 80 percent of the median income in your area (or area in which you plan to buy).
The main draw of a HomeReady loan is its low down payment requirement: just 3 percent of the home’s purchase price. That down payment can come from a variety of sources, such as gifts from family or friends and assistance grants.
However, it can only be used for primary residences. You can use it for a single-family detached home or eligible condo, co-op or manufactured home. You can also use it for a duplex, triplex or four-unit property provided you live in one of the units as your primary residence.
This type of loan is often a 30-year fixed-rate mortgage, but it’s also available in 10-, 15- and 20-year fixed-rate terms. There’s also an adjustable-rate version, available in five-, seven- and 10-year terms.
HomeReady loans are backed by Fannie Mae, a government-sponsored enterprise (GSE), but they’re funded by mortgage lenders. You’ll apply for and close the mortgage through a bank, credit union, savings and loan or other mortgage lender.
HomeReady vs. Home Possible mortgages
Home Possible is a similar program to HomeReady, but it’s backed by Freddie Mac instead of Fannie Mae. Both loans are designed for lower-income borrowers. The key difference: If you’re buying a single-family home at a fixed rate, you’ll need a credit score of at least 660 for a Home Possible loan. You can buy the same type of home with a credit score as low as 620 with a HomeReady mortgage.
HomeReady mortgage requirements
To qualify for a HomeReady mortgage, you’ll need:
A 620 minimum credit score
A 3 percent down payment
Income at or below 80 percent of the area median income (AMI); you can use Fannie’s Mae’s lookup tool to check AMI limits in your location
A debt-to-income (DTI) ratio of no more than 45 percent (or up to 50 percent depending on circumstances)
If you’re a first-time homebuyer, you’ll also need to complete a homebuyer education course.
You can currently have one other financed property to your name (in addition to the one you’re buying), per Fannie Mae guidelines.
Pros and cons of HomeReady mortgages
Pros
Low down payment: HomeReady mortgages only require 3 percent down, and those funds don’t have to come from your personal savings. You can use gifts from relatives or friends, for example.
Reduced mortgage insurance: With conventional loans, you’re required to pay private mortgage insurance if you put less than 20 percent down. The HomeReady program lowers these premiums for borrowers who put less than 10 percent down. On top of that: You can request to cancel the premiums once you’ve paid down the mortgage to 80 percent of the home’s price.
Rental income on your application: When you apply for a HomeReady loan, you can include projected rental income as part of your qualifying income, thus boosting your approval chances. This can help borrowers who want the funds for property they’ll both live in and rent out.
Can be used to refinance: A HomeReady mortgage can be used to refinance your current mortgage, which can help you obtain more favorable loan terms, such as a lower interest rate or reduced monthly payments.
Cons
Income limits: Your income cannot surpass 80 percent of your area’s median income. You can use Fannie Mae’s lookup tool to find out whether you qualify based on income.
Type of property limits: HomeReady loans cannot be used to purchase a second or vacation property.
Loan size limits: The HomeReady program is subject to conforming loan limits. In 2025, that means you can’t borrow more than $806,500 for a single-family home in most areas. (Some costlier areas like Alaska, parts of California and Hawaii have higher limits.)
What borrowers should know about HomeReady loans today
HomeReady mortgages offer a more flexible route to financing for lower-income borrowers. In addition to the 3 percent down payment minimum and more affordable mortgage insurance, the program also currently provides a $2,500 lender credit for first-time homebuyers with incomes no more than 50 percent of the area median income. The credit can be applied to the down payment, closing costs or other aspects of the transaction. It is in effect for eligible loans now through Feb. 28, 2026.
HomeReady mortgage FAQ
How do I know if my lender offers HomeReady?
How can I apply for a HomeReady mortgage?
