Fannie Mae Selling Guide B5-6-01 — HomeReady Mortgage Loan and Borrower Eligibility

Fannie Mae Selling Guide B5-6-01 — HomeReady Mortgage Loan and Borrower Eligibility

B5-6-01, HomeReady Mortgage Loan and Borrower Eligibility (06/04/2025) Introduction This topic contains information on HomeReady mortgage loan and borrower eligibility, including: Overview General Loan Eligibility Maximum LTV, CLTV, and HCLTV Ratios Published May 6, 2026 792 Requirements for HomeReady Transactions with LTV, CLTV, or HCLTV Ratios of 95.01 – 97% Subordinate Financing Eligible Loan Types Temporary Buydowns Borrower Income Limits and Calculations Homeownership Education and Housing Counseling Overview The HomeReady mortgage is a conventional community lending mortgage that offers underwriting flexibilities to qualified borrowers who meet specific income criteria. The HomeReady mortgage is a standard product offering available to all Fannie Mae lenders. No special approvals are required. General Loan Eligibility A HomeReady mortgage is a first mortgage, purchase money, or limited cash-out refinance transaction for one- to four-unit properties used as the borrower’s principal residence. Eligible properties include: one-unit properties, including manufactured housing, and units in condos and PUDs; units in co-ops, provided the unit conforms to Fannie Mae's requirements, and the lender has received specific authority to deliver mortgages on co-ops to Fannie Mae; existing structures and new construction; and two-, three-, and four-unit properties. Additional restrictions apply to transactions with LTV, CLTV, or HCLTV ratios of 95.01 — 97%. See below for additional requirements for HomeReady mortgage transactions. Maximum LTV, CLTV, and HCLTV Ratios Refer to the Eligibility Matrix for maximum allowable LTV, CLTV, and HCLTV ratios for HomeReady mortgage loans. HomeReady loans that are originated in connection with manufactured homes must follow the more restrictive LTV, CLTV, and HCLTV ratios that apply. For example, the maximum LTV, CLTV, and HCLTV ratio for a one-unit HomeReady manufactured home that does not meet the MH Advantage requirements is 95%. Requirements for HomeReady Transactions with LTV, CLTV, or HCLTV Ratios of 95.01 – 97% If the LTV, CLTV, or HCLTV ratio exceeds 95% for a HomeReady transaction, the following requirements apply. Published May 6, 2026 793 Criteria Requirements LTV, CLTV, or HCLTV Ratio 95.01 to 97% Note: The CLTV ratio can be up to 105% if the subordinate lien is a Community Seconds loan. Loan Purpose Purchase transactions or limited cash-out refinances only. Existing Loan For limited cash-out refinances: The lender must inform DU that the existing loan is owned (or securitized) by Fannie Mae using the Owner of Existing Mortgage field in the online loan application before submitting the loan to DU. The DU message indicating the borrower's existing loan was identified as a Fannie Mae loan may be relied upon as confirmation the loan is owned by Fannie Mae. When DU is not able to identify the borrower's existing loan is owned (or securitized) by Fannie Mae, the lender must provide documentation. Documentation may come from • the lender’s servicing system, • the current servicer (if the lender is not the servicer), • Fannie Mae’s Loan Lookup tool, or • any other source as confirmed by the lender. Note: This requirement does not apply if the CLTV exceeds 95% only due to a Community Seconds loan. Loan Type Fixed-rate loans with terms up to 30 years. Note: High-balance and ARM loans are not permitted. Property and Occupancy One-unit principal residence. Manufactured housing is not permitted, unless the property meets the MH Advantage requirements. All borrowers must occupy the property unless there is a Community Seconds subordinate lien. Underwriting Method DU only Reserves Reserves requirements will be determined by DU. Other All other standard purchase and limited cash-out refinance and HomeReady requirements apply. Published May 6, 2026 794 Subordinate Financing Subordinate financing must comply with: the terms for the Community Seconds option, which allow, among other provisions, a maximum combined loan-to-value of 105% (see B5-5.1-01, Community Seconds Loans through B5-5.1-03, Community Seconds: Shared Appreciation Transactions); or subordinate financing permitted in accordance with B2-1.2-04, Subordinate Financing. Subordinate financing from a seller-held mortgage is not permitted with HomeReady mortgages. Eligible Loan Types HomeReady mortgage transactions can be secured by fixed-rate or ARM loans. The following table identifies the ARM plans that are available for HomeReady mortgage loans. ARM Plans Eligible for HomeReady Mortgages 30-year Five-Year ARM 4927 Seven-Year ARM 4928 Ten-Year ARM 4929 Temporary Buydowns The following requirements apply to temporary interest rate buydowns on HomeReady mortgages: Loans must be purchase transactions. Loans must be fixed-rate or seven- or ten-year ARMs. All other standard buydown policies apply. See B2-1.4-04, Temporary Interest Rate Buydowns, for additional information. Borrower Income Limits and Calculations In determining whether a mortgage is eligible under the borrower income limits, the lender must count the income from all borrowers who will sign the note, to the extent that the income is considered in evaluating creditworthiness for the loan. The lender must use the same methodology in determining income eligibility for a HomeReady mortgage as the lender uses in reporting “Monthly Income” in data delivery. Eligibility for a HomeReady mortgage loan compares Published May 6, 2026 795 the borrower’s income to the applicable area median income (AMI) for the property’s location. For determining Fannie Mae loan eligibility, lenders must refer to the AMIs that Fannie Mae uses in Desktop Underwriter or on Fannie Mae’s website and may not rely on other published versions (such as AMIs posted on huduser.org). To be eligible as a HomeReady mortgage, the total annual qualifying income may not exceed 80% of the AMI for the property’s location. If the property has resale restrictions, see B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements, for additional requirements. Note: For loan casefiles that are not underwritten as a HomeReady mortgage loan, DU will issue a message indicating that the loan may be eligible as a HomeReady loan if the total qualifying income entered in DU appears to be within the applicable AMI limit for the property’s location. See B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements, for additional information. Homeownership Education and Housing Counseling Homeownership education is required for HomeReady purchase loans when all occupying borrowers are first- time homebuyers. Borrowers who complete housing counseling within 12 months prior to loan closing may be eligible for a loan-level price adjustment credit. Refer to B2-2-06, Homeownership Education and Housing Counseling, for options for meeting these requirements. Recent Related Announcements The table below provides references to recently issued Announcements that are related to this topic. Announcements Issue Date Announcement SEL-2025-04 June 04, 2025 Announcement SEL-2025-02 April 02, 2025 Announcement SEL-2024-04 June 05, 2024 Announcement SEL-2022-03 April 06, 2022 Announcement SEL-2020-07 December 16, 2020 Announcement SEL-2020-06 October 07, 2020 Announcement SEL-2020-02 April 01, 2020 Announcement SEL-2020-01 February 05, 2020 Published May 6, 2026 796 Announcements Issue Date Announcement SEL-2019-08 October 02, 2019 Announcement SEL-2019-06 July 03, 2019

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