When you’re buying or refinancing a house it goes without saying you want to get a competitive interest rate with favorable terms associated with the money you are borrowing.
Two programs that support your ability to do this are Fannie Mae Home Ready and Freddie Mac Home Possible. These two programs typically have about 1/4 to 3/8 improvement in rate than the average 30-year fixed-rate with 1 to 1.5 percent improvement in costs compared to a traditional mortgage on any given day. The differences can be based on your credit score, so you want to be sure to check with your lender with regards to specifics however, the two programs can greatly benefit you.
Both Fannie Mae Home Ready and Freddie Mac Home Possible are geared towards helping people with less income financing homes in densely populated geographic areas, hence why these two programs both have income limitations. You heard that right, if you make too much money you are ineligible for this program as this program is designed to help families earning less than the census average income in a geographic area.
For example, if you were to visit
https://homeready-eligibility.fanniemae.com/homeready/ and plug in an address in Santa Rosa in the 95405-zip code you would see the income limit is $84,100 per year. This means if you earn more than $84,100 annually you would be ineligible for either and you would be subject to a current market interest rate and term on a conventional mortgage. However, not all areas are created equal if you’re looking for a loan you’ll want to visit
https://homeready-eligibility.fanniemae.com/homeready/ and http://www.freddiemac.com/homepossible/eligibility.html.
Always double-check both websites to see if the property that you’re financing is eligible for either program. If you are eligible for the program the same conventional guidelines apply for a traditional conventional mortgage. There is a caveat -you must take an online homebuyer education course regardless if you’re purchasing or refinancing your home.
On the purchase transaction utilizing these websites can be especially beneficial if you’re looking at homes in different areas. It very well might be that you could be subject to a much better interest rate and better term for one property than for another based on the eligibility of Home Ready or Home Possible. So, if you are house hunting with your realtor make sure either you or your loan officer is looking at this on a per property basis as you search for homes. Changing from traditional conventional mortgage to Home Ready or Home Possible could mean the difference between qualifying for a higher price point or getting more borrowing power for a property which could be beneficial as you search for homes.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.