Written By: Glenn Michaels, Op-Ed Writer
Fannie Mae has announced the launch of their Home Ready Program which is the replacement product of the Community Home Buyer Program.
FHA loans are available for owner occupied primary 1 – 4 family units and units in condominium project approved projects at 96.50% or 3.50% down. The Home Ready program is good for 1 – 4 family owner occupied primary residences and units in a warrantable condominium project at 97% or 3% down.
FHA – 96.50% FNMA - 97%
All FHA loans regardless of loan to value have an upfront Mortgage Insurance Premium and an annual mortgage insurance premium paid monthly. Currently the upfront MIP is 1.75% which is usually financed into the loan. The borrower does have the option to pay the entire upfront Mortgage Insurance Premium in cash however most borrowers finance the premium. The borrowers and the property must be approved by he lenders.
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All Home Ready loans with a loan to value in excess of 80% will have Private Mortgage Insurance and there are several options available to pay this premium. The borrowers and the property must be approved by the lender and by the Private Mortgage Insurance Company.
Everyone looks at the credit scores and both programs have minimum credit scores. The decision score for FHA is 580 if you have an institutional investor that will allow loans with a decision score that low. The decision score for Home Ready is 620.
FHA loans are more lenient on credit than the Home Ready Program but there are now two programs with a low down payment. Qualifying ratios for both programs are based on Desk Top Underwriter (DU) for the Home Ready Program and the FHA program can be underwritten by Desk Top Underwriter (DU), Loan Prospector (LP) or manually along with the TOTAL Scorecard. The qualifying ratios based on the automated systems are pretty high if the borrower has some liquidity. There are files being passed by DU with ratios of 45%+ and 55%+.
Loan Officers and their clients now have two major programs available for their borrowers and all underwriters’s better be aware how to handle these programs.
Mortgage lenders, loan officers and borrowers now have some flexibility for first time home buyers with minimum down payments.
Loan terms for both programs are generally fifteen (15) and or thirty (30) years. FHA will allow other terms as long as they are fully amortizing. No balloons or interest only mortgages.
Underwriter’s if you do not know about the Home Ready Program go to either the FNMA web site or do a search for the program.
Underwriters must learn about each program to underwrite both programs.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
