In the United States, thousands of borrowers apply and obtain mortgages on a daily basis. One of the standard types of home loans is a conventional mortgage.
Many borrowers may have a conventional mortgage without even realizing it. In fact, there is a strong likelihood that, if you have a conventional mortgage, that your loan was purchased by Fannie Mae.
Fannie Mae offers a variety of mortgage financing solutions that borrowers can take advantage of, including HomeReady, their affordable lending solution. New Century Mortgage is pleased to offer borrowers the option of utilizing HomeReady for your next purchase or refinance among its suite of affordable mortgage options.
Let’s dive into a brief overview of who Fannie Mae is, as well as outline how HomeReady might be a program to consider for your next purchase or refinance.
Fannie Mae: A Brief History
The government sponsored entity (GSE) known as Fannie Mae was created by Congress back in 1938 with the mission to provide liquidity to the housing and mortgage markets by purchasing loans from banks and other lending institutions1.
Its main competitor is Freddie Mac, another government sponsored entity (GSE) which was created to compete with Fannie Mae. Both aggregators purchase loans and package them into financial instruments referred to as mortgage-back securities that go on to be sold to investors2.
In late 2008, both Fannie Mae and Freddie Mac entered into conservatorship under the authority of the Federal Housing Finance Agency (FHFA) as a result of the financial crisis3.
Fannie Mae has certainly recovered over the last decade from those once turbulent times as demand for homeownership has increased substantially, allowing the housing and mortgage markets to grow and recover. Demand has also been fueled by the need for and desire for additional affordable lending programs.
As a response to the market, Fannie Mae launched its affordable lending program known to many as HomeReady.
HomeReady Affordable Lending Program
Fannie Mae’s HomeReady program is essentially a flexible and affordable loan program for credit-worthy, low income borrowers looking to purchase a new home or refinance an existing mortgage loan.
One of the biggest advantages of the HomeReady program is that borrowers can put less down on a home than a standard conventional product, which is also lower than FHA’s minimum down payment requirement4.
Borrowers can also utilize other qualified down payment assistance programs in combination with HomeReady4. The funds you receive from assistance programs are also not limited to one source. You can even use personal gifts for your mortgage transaction or have a seller contribute to your closing costs to make the deal even more affordable.
Other ways that borrowers can benefit are for loans that require private mortgage insurance. HomeReady allows for reduced mortgage insurance coverage, meaning a lower monthly premium that borrowers have to pay. The mortgage insurance is also cancellable, provided certain thresholds and restrictions are met.
Borrowers with higher credit scores that can qualify for other conventional programs may also benefit in some cases by obtaining more favorable risk-based pricing through the HomeReady program4.
While HomeReady can benefit first-time homebuyers looking to put less down on a home, it is available to repeat homeowners as well.
Want to learn more about Fannie Mae’s HomeReady program? New Century Mortgage can answer all your HomeReady related questions.
Give us a call at 850-775-0135 or email us at email@example.com
1 Pickert, K. (2008, July 14). A Brief History of Fannie Mae and Freddie Mac. Retrieved June 8, 2020, from http://content.time.com/time/business/article/0,8599,1822766,00.html
2 About Fannie Mae and Freddie Mac. (n.d.). Retrieved June 8, 2020, from https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Pages/About-Fannie-Mae—Freddie-Mac.aspx
3 Fannie Mae and Freddie Mac Conservatorship. (n.d.). Retrieved June 8, 2020, from https://www.fhfa.gov/Conservatorship/Pages/History-of-Fannie-Mae–Freddie-Conservatorships.aspx
4 HomeReady Mortgage. (n.d.). Retrieved June 8, 2020, from https://singlefamily.fanniemae.com/originating-underwriting/mortgage-products/homeready-mortgage