FNMA’s HomeReady Program

(rev. 6/30/2016)

Presented by J.J. Sawicki, CMPMerrimack Mortgage Co. LLC

OverviewHelp meet the diverse needs of today’s buyers with FNMA’s enhanced affordable lending program, HomeReady.

This program is designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities.

HomeReady lets you lend with confidence while expanding access to credit and supporting sustainable homeownership. Product features designed to align with today’s buyer demographics and support sustainable homeownership.

Home Ready Key FeaturesKey Features:

● Up to 97% financing (1 unit purchase)● No minimum borrower contribution (1 unit properties); use flexible sources of

funds for down payment and closing costs. Gifts, grants and cash on hand are allowed

● Homeownership counseling through Framework is required by at least one borrower

Terms➢ 30 year fixed rate product➢ 1-4 family primary residence, condos and PUDs➢ Primary residence➢ Purchase and rate term refinances➢ Use 30HRM or 30HRM-AF product codes

Flexibilities● Non-occupant co-borrowers are allowed up to 95% LTV. Income is used for

qualifying and is subject to the applicable income limits. Max 43% DTI for occupying borrowers

● Will consider income from a non-borrowing household member!● Non-borrower income must equal at least 30% of the borrower’s qualifying

income used in the transaction. Income from more than one non-borrower household member may be considered!

● Non-borrower must document their income and must sign a statement of intent to reside in the property for a minimum of 12 months (FNMA Form 1019)

Borrower Income EligibilityNo income limit: Properties in low income census tract (31% of census tracts in the US)

100% of AMI: Properties in high-minority census tracts and designated disaster areas (20% of census tracts in the US)

80% of AMI: All other properties (49% of census tracts in the US)

DU will confirm Income Eligibility

Income flexibilities● Boarder and rental income is allowed as an exception● Rental income from 2-4 unit properties per FNMA guidelines● Boarder Income

○ Boarder must have shared residence for at least 12 months

○ Documentation of the income must be provided for at least 12 months and will be averaged over

12 months

○ Can be allowed up to 30% of the qualifying income

○ 1 unit properties only

New Feature! Non-Borrower Income● Non-borrower household income can be considered as a compensating factor when the DTI is >45% up

to a max of 50%

● Non-borrower income is not used as qualifying income and is not considered when calculating the

ratios

● The non-borrower will not be listed on the application. You will enter this income in DU

● The following requirements apply:

○ Non-borrower income must equal at least 30% of the total monthly qualifying income used by the

borrower. Income from more than on non-borrower household member may be considered

○ Non-borrower income must adhere to FNMA guidelines. Verbal VOEs and tax transcripts are not

required

○ Non-borrowers may be relatives or non-relatives

○ Non-borrowers must sign a statement of intent to reside with the borrower for a minimum of 12

months

○ Boarder or rental income from a non-borrower is not included

Non-borrower income scenario

Assets - Cash On HandCash on hand - Acceptable for downpayment, closing costs and/or prepaid items. Must verify and document that the borrower customarily uses cash for expenses and that the amount saved is consistent with the borrower’s previous payment practices. “Cash On Hand” is now an option in DU’s Asset drop down. Cash on hand cannot be used for reserves

LTVs# Units Purchase and Rate/Term Minimum downpayment

required from borrower’s personal funds

1 unit 97%* 0%

2 unit 85% 3%

3-4 unit 75% 3%

● Minimum downpayment from borrower’s personal funds only applies to purchase transactions

● A gift or a grant may be used for the borrower’s own minimum contribution for a 1 unit property

* If LTV > 95%, purchase only allowed

Mortgage Insurance

LTV Coverage

95.01-97.00% 25%

90.01-95.00% 25%

85.01-90.00% 25%

80.01-85.00% 12%

● Initial and one time MI premiums may be paid by the seller● If the subject is a 2-4 unit property, MI auto cancels at mid point, not 78% LTV

Homeownership Counseling● One borrower must obtain Homeownership Counseling through Framework● The cost for the counseling is $75 and must be disclosed on the LE● A certificate will be provided upon completion and must be provided● Post purchase homeownership support offered for the life of the loan through

Framework● Landlord education required for 2-4 unit. This will not be done through

Framework

Underwriting● DU Approve/Eligible required● Minimum 620 FICO required for 1 unit● Minimum 640 FICO required for 2-4 units● If paying off revolving debt to qualifying, account must be closed● Full appraisal required● Secondary financing is not allowed● The payment on the credit report (or 5% of the balance if payment not stated) will be used

to qualify, regardless of the number of months remaining● Max 50% DTI with documented non-borrower household income as a compensating

factor. Otherwise, max DTI is 45%● The borrower cannot have ownership interest in another property at the time of closing.

This does not apply to non-occupant co-borrowers

Non-traditional creditAt least one borrower must have traditional credit and a credit score and receive an Approve/Eligible through DU

If each borrower does not have 3 traditional tradelines with a 12 month history, you may supplement with alternative credit

PricingStandard LLPAs waived with an LTV above 80% and a 680 FICO or greater.

For loans outside of these parameters, the standard LLPAs apply, BUT there is a cumulative cap of 1.50%!

Pricing is better than or equal to standard loan pricing

● Additional LLPAs for loan size on AF product

So how do products compare?FHA Conventional Home Possible HomeReady

FICO LLPAs up to -1.5

No cap on LLPAs No cap on LLPAs No LLPAs > 80 with a 680+. Outside of those parameters, -1.5% cap

UFMIP of 1.75% More underwriting restrictions

More underwriting restrictions

Flexibilities in underwriting

Monthly MIP for life of loan (.80-.85)

Standard MI Reduced MI but only through June 30th

Slightly reduced MI at > 95% LTV

Pricing is very good Pricing is similar to HomeReady

Pricing quite a bit worse

Pricing very good. Compared to Conventional base pricing

DU - Things to know!HomeReady: In the Government Info tab in DU, under the Community Lending Product, you will select

“HomeReady” from the drop down to flag your loan under this product and enter the FNMA Community MSA.

If the loan is not eligible for the HomeReady Product, the DU findings will issue a message specifying this as

the reason

Assets: On the Assets screen, you may select “Cash on hand” in the drop down, if applicable

Non-borrower income: This must be selected as a second source of income in the Income screen with Income

Type of “Non Borrower Household Income” in the drop down, if applicable

LinksHomeReady Resources: https://www.fanniemae.com/singlefamily/homeready

HomeReady Census Tract Lookup: https://homeready-eligibility.fanniemae.com/homeready/

Geocode Mapping System: https://geomap.ffiec.gov/FFIECGeocMap/GeocodeMap1.aspx

Customizable Marketing materials: https://www.fanniemae.com/singlefamily/homeready-outreach-materials

Framework Homebuyer Counseling: https://www.knowyouroptions.com/framework

DISCLAIMER:Presentation for Industry Professionals only, not intended to be distributed to consumers.Subject to underwriting approval.Terms and conditions subject to change without notice.Information accurate as of date published.

Licensed by the New Hampshire Banking Department, Rhode Island Licensed Lender, and Licensed by the New Jersey Department of Banking and Insurance