For those of you that are looking to purchase a home with a LOWER (yes LOWER!) down payment then the much-vaunted FHA program, Fannie Mae, beginning January 23, 2022, is offering a low down payment option called Home Ready. 7th Level Mortgage is accepting applications for your home purchase with this program. Like FHA, the credit requirements are more relaxed and the income requirements are not as stringent as they are with conforming conventional loans. Another feature of this program is that although there is a private mortgage insurance premium that will have to be paid, it is reduced; therefore offering you a lower total payment than you would pay with an FHA loan.
The requirements for these loans are as follows:
- You cannot earn more than 80% of your census’s tract median income. Your loan officer can check into what that amount is based on your geographical area. If your area’s median income is $100,000 per year your income must be $80,000 or LESS.
- Like FHA, you must agree to take a 4-6 hour homeownership education course.
- Your median FICO score must be at least 620.
- Your debt to income ratio cannot exceed 50%.
Eligible properties include:
- Condominium Units
- Planned Unit Developments
- Manufactured Homes
- Multifamily homes with 2, 3 or 4 units. If you are looking to purchase a multi-family dwelling, your credit score must be at least 680 or higher. Second homes and investment properties are not eligible for financing via this program.
With higher home values and mortgage rates on the move, I recommend applying today, especially if you’re already under contract to purchase a home. The loan officers and the team at 7th Level Mortgage are ready for your call and want to work with you to help you obtain your share of the American dream…homeownership!
Unlike the other available mortgage programs, some income flexibilities are available.
Accessory Unit Income:
Suppose you are buying a home with a so-called in-law suite upstairs with a functioning separate kitchen and bathroom. The income that you are deriving from that unit can be applied to your income stream to a maximum of 75%. The 25% that is subtracted is to accommodate the vacancy factor or loss in the event the tenant abandons or damages the property. Keep in mind, you must occupy one of the units because this program is not eligible for investment properties.
This is an excellent opportunity to use income that is received from a roommate. Typically a roommate does not have a bona fide lease because the living situation is typically for short-term purposes. The calculation that is used to derive the income is up to 30% of the qualified income, multiplied by at least 9 months. The shared residency must be at least 9 months, so people that are just starting to live in a home as a shared residency must wait until that requirement is met. Be prepared to show copies of the canceled checks (front and back).
For many buyers, this will be their first time buying a home and that is why the education course is so important. Because there are different rules and regulations for condominiums and planned unit developments, versus a single-family stand-alone residence, this course will cover all the covenants and restrictions one will agree to when buying a condo or a PUD. 7th Level Mortgage will refer you to a third-party course provider in your area. There are exceptions to the course requirement. As long as the agency is HUD-approved and completed before closing and a Community Seconds mortgage or down payment assistance program is being sought, a waiver may be granted. Lack of internet access, a disability, and other issues may necessitate the need for a telephone conference call or an in-person class instead of utilizing an online course to make the requirement. If you have already taken a course on homeownership, a completed Fannie Mae form number 1017 can provide evidence that the course has already been taken.
Finally, 7th Level Mortgage is excited to offer this program in their menu of homeownership options. With mortgage rates expected to go higher and with higher loan limits now available, make the call TODAY!