HomeReady is Fannie Mae's affordable lending program for low-to-moderate income borrowers. It allows 97% LTV on a 1-unit primary, requires a 620 minimum FICO, and offers reduced MI rates compared to standard conventional financing. The income limit is the piece most LOs get wrong.
How the AMI Cap Works
Borrower income cannot exceed 80% of the area median income for the property location. That cap applies to all borrowers on the loan, plus any non-borrower household members in certain scenarios. The 80% AMI threshold is calculated using Fannie Mae's online lookup tool tied to the subject property address. AMI figures update annually, so a borrower who was over the limit last year may qualify now.
The Low-Income Census Tract Exception
If the subject property is located in a low-income census tract, Fannie Mae removes the income cap entirely. Any income level qualifies. You verify this by running the property address through Fannie Mae's HomeReady eligibility lookup. If the tool returns no income limit, document that in the file. Some LOs miss this exception and incorrectly disqualify borrowers in designated tracts.
Documentation Required
- ✦Run the property address through the Fannie Mae HomeReady Eligibility tool and screenshot the result
- ✦Verify qualifying income against the AMI threshold at application, not just at preapproval
- ✦If a non-borrower household member earns income that pushes total household over 80% AMI, confirm whether that income is being counted per DU findings
- ✦Homebuyer education is required for first-time buyers and at least one borrower when all borrowers are first-time buyers
Other Program Details
- ✦97% LTV on 1-unit primary with standard PMI, reduced rates with HomeReady MI
- ✦620 minimum FICO, though lender overlays often require 640 or 660
- ✦Non-occupant co-borrowers allowed with up to 97% LTV on 1-unit
- ✦Gift funds allowed for entire down payment, no borrower own funds required
- ✦DU approval required, no manual underwrite path on HomeReady at 97%
Aria can look up whether a specific property address qualifies under HomeReady income limits and walk through documentation requirements for borderline income scenarios. Ask at vicariointel.com.
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