HomeReady Mortgages

 In Different Types of Loans

How would you like to need only 3% down, have lower interest rates, lower mortgage insurance rates, not have to be a first-time homebuyer, and not be required to have any of the down payment or closing costs come from your own funds? If that sounds like a good deal, you might be interested in HomeReady mortgages.

Here’s what you need to know.

HomeReady mortgages are meant for people with low to moderate income, which in reality, is not actually very low. Here’s how the income requirements work.

Income Requirements

If the house you are buying or refinancing is in a census tract that is considered a low-income census tract, there is no limit to how much you can make and still qualify for a HomeReady loan.

If the house is not in a low-income census tract, then you have to make less than the AMI (area median income) for that census tract.  In most of the Denver area, the AMI is $89,900, so if you make less than $89,900, you satisfy the income requirement for a HomeReady loan.

It is extremely difficult to identify a low-income census tract by yourself.  As an example, the house we own in the Capital Hill neighborhood of Denver is not in a low-income census tract, but the houses directly across the street are.  There is no discernible difference in the houses on one side of the street compared to the houses on the other side of the street.  They just happen to be in different census tracts.

One interesting note regarding income limits is that we only have to count the income we use to qualify someone for a mortgage in the income limit calculation.  As an example, if you are buying a house and you make $110,000, but only $85,000 of your total income is base salary, and the remaining $25,000 is made up of commissions, bonuses, or overtime, and you qualify for the loan based on just your base salary of $85,000, you can get a HomeReady loan. 

Advantages of HomeReady Mortgages

Here are some of the advantages to a HomeReady loan.

  • You only need 3% down.
  • The interest rates are usually lower than they are for regular conventional loans.
  • The mortgage insurance rates are lower than they are for regular conventional loans if you are putting less than 10% down.
  • You can own other real estate and still get a HomeReady loan.  
  • You do not have to be a first-time home buyer.
  • None of the money has to be from you own funds. You can get 100% of the money for the down payment and the closing costs as a gift from a relative.

Wondering if the house you want to get a mortgage for is in a low-income census tract and doesn’t have any income restrictions? Have any other questions about these HomeReady mortgages? Give us a call, send an email, or text us.

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