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HomeReady mortgages make buying a home with 3% down a reality

What we'll cover

  • How HomeReady® mortgages work

  • Qualification requirements

  • Flexibility with the down payment source

Through the years, it’s gotten more expensive to buy a house. Before 1985, the average cost to buy a home was less than $100,000. Now? New homes are selling for an average that’s closer to $500,000.

If you wanted to put 20% down on a $500,000 home, it would be $100,000. But with a HomeReady® mortgage, you only need to have a down payment of $15,000 to purchase that same home.

Making homeownership more accessible

A HomeReady mortgage is a conventional loan offered by Fannie Mae (a.k.a. the Federal National Mortgage Association, a government-sponsored organization). It’s tailored toward low- to moderate-income borrowers and allows you to purchase a single-family home for just 3% of a home’s purchase price. It also has flexible requirements when it comes to where you get the money for your down payment.

HomeReady mortgages are available through various lenders, including Ally Home .

HomeReady mortgage requirements

Both first-time and repeat homebuyers can qualify for the program, but let's unpack some of the requirements.

Homeownership education

If all the applicants are first-time homebuyers, then at least one borrower must take an online homeownership education course from Framework® (or meet one of the exceptions).

Income limits

With regards to the program’s income limit, you can qualify for a HomeReady loan if your income is equal to or less than 80% of the area median income (AMI) for the property’s location. (If you plan on having a co-borrower, keep in mind lenders will count the income from all borrowers toward the limit.) Because cost of living can vary greatly depending on where you work versus where you’re looking to live, you’ll want to make sure you’re eligible.

What does all that mean? Say you’re looking for a house in the heart of Detroit, Michigan. The area median income in downtown is $96,200. To qualify, your annual income will need to be less than or equal to $76,960. Or if you’re looking to settle down in Charlotte, North Carolina, you’ll need to make no more than $78,960 a year.


Borrowers must also meet credit score requirements . Don’t have a credit score or a credit history? Even if you have nontraditional credit, you may still eligible for a HomeReady mortgage with some lenders.

Debt-to-income ratio

A HomeReady mortgage also gives borrowers flexibility when it comes to your debt-to-income ( DTI ) ratio — the amount of your income that goes toward paying off debt. Prospective homeowners can qualify for a HomeReady mortgage with a DTI of up to 50%.

Prepare for potential additional costs

If you put down less than 10%, you will need to have mortgage insurance (MI). This coverage helps protect the lender in case you fall behind on your mortgage payments. With a HomeReady mortgage, MI can be canceled once your home equity reaches 20%.

Get a HomeReady mortgage without saving all the money yourself

The HomeReady program opens a lot of doors when it comes to where you get the money for both your down payment and closing costs .

Some loans require your down payment to be mostly (if not all) your own money while a HomeReady mortgage lets you pay for these expenses with funds from outside sources, including gifts, grants and Community Seconds®, another Fannie Mae program that helps eligible homeowners.

If you are looking for another funding boost, Ally Home now offers $5,000 to qualified buyers in select cities to be used toward their down payment and closing costs. Speak with a home loan expert to see if you qualify.

A 20% down payment shouldn’t be the one thing standing in your way of becoming a homeowner. Instead, a HomeReady mortgage and a 3% down payment could have you kicking back in your new home in no time.

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