HomeReady Mortgage To 97% LTV

Do you need a flexible product mortgage loan? If so here is Fannie Mae’s which is labeled as Fannie Mae Home Ready Mortgage.

Some years ago, Fannie Mae closed the Flex 97%  product. However, they still have an option for 97% financing under the HomeReady
Mortgage Product.

 As you probably know, Fannie Mae and Freddie Mac do not make mortgage loans, however they do purchase loans after an approved lender, broker, or bank has closed the loans. The loans must be underwritten to their guidelines for the type mortgage product that is being submitted.

Home Ready Mortgage

* See Disclosure
This is basic guidelines for this HomeReady loan, which can get
you into a home with 3% down payment, with the loan to value of 97%.

Advantages for those seeking loan terms without as many restrictions:


  • Income from non-borrower member of the household may be used as a compensating factor when the debt-to-income ratio is >; 45%, up to 50%.
  • Boarder, and rental unit income may be allowed
  • Income may be counted from a non-occupant person, such as a parent, or family member, close relationship
  • 3% down-payment which does not have to come from the borrower’s own funds. There is not minimum down payment contributions required for this loan product.
These guidelines are for 1-Unit properties
  • Purchase LTV = 97%  Limited Cash Out Refinance = 95%
  • Purchase or limited cash out refinancing
  • No income limits in low-income census tracts
  • 100% of area median income in high-minority census tracts or designated disaster areas
  • 80% of area median income in all other census tracts
  • No minimum contributions from the borrower’s own funds
  • Acceptable source of funds for the 3% investment may come from: gifts, grants Community Seconds, and cash on hand
  • If there are seconds, subordinate financing; restrictions will apply for base loan to value, and combined loan to value. *lender will emphasize this
  • The applicant may NOT have ownership interest in any other property
  • Non-occupant borrowers allowed up to a maximum LTV (loan to value) of 95% for automatic underwriting in DU, however manually underwritten properties the LTV is
    limited to 90%. Their income may be used to qualify, however the income is
    subject to income limitations. Non-occupant borrower may have interest in
    another property.
  • Credit Score for LTV >75% = 700 for DTI of 45% **Manuel Underwriting
  • Debt to Income Ratio (DTI) of 36% = 680 score  +- for lower credit scores, and lower LTV of 75%. Certain additional parameters may exist. 45% DTI for 700
    credit scores, LTV to 97%, and other required parameters that may exist. **Lower credit scores are allowed with certain criteria.
  • Mortgage Insurance is required for LTV ratios of greater than 90%
  • **these could changed based upon your personal circumstances

This is some basic information for you to review, please note this does not entail all of the requirements for this mortgage loan product. These specify some standard parameters.


All borrower loans have unique circumstances, which include funds for closing, credit information, debts to income, income, and other borrower needs. Those needs are applied to the basic criteria and then changes are made if it is within the capacity to do so.

Each area of an applicant’s financial, and credit application is analyzed, and if possible using the guidelines, the lender will make adjustments and approve this loan.

Some lenders use Fannie Mae’s automated underwriting system for approvals, these systems spit out the requirements for the loan. When certain criterion is met, these systems will approve the loan subject to certain requirements.

When a lender has to manually underwrite a mortgage applicant’s loan file, the underwriter has a set of rules that is to be applied to the loan also. Those rules may vary depending upon the credit score, the LTV, the funds for closing, and the property type.

Rules apply for each property type, (single-family-1 unit, 2-4 Units etc.). We have voiced here only 1-unit property basic guidelines. Rules also apply differently for Limited Cash-out refinances.

This mortgage product goes beyond the standard guidelines for mortgage lending. People’s needs vary and you have the right to know that if you do not have assets to pay for a standard 5% down payment, or if you credit score is not 700; there are other options.

Check with your lender of choice and they should be proficient in giving you the best solution for buying your new home. The lender wants to help you purchase a home, or refinance your existing home; therefore, you must build your trust in them to do so.

As stated this is a mortgage product of Fannie Mae which allows flexible underwriting for this Affordable Housing product, most lender will offer this product. However, these guidelines may vary for certain aspects of the mortgage, and this is for informational purposes only. Minimum credit scores and other items that are their exclusive responsibility may be slightly different.  These noted guidelines are only basic, and mortgage guidelines change frequently. There is no guarantee that you will qualify for this product, your ability to qualify is based upon your total mortgage loan file.
Linda Todd