HomeReady® mortgage: How to apply for this loan

As of November 16, 2025, both Fannie Mae and Freddie Mac no longer have a minimum credit score threshold in their conventional loan eligibility guidelines. Loan approval will instead be based on an evaluation of overall credit risk factors.

As the average cost of homes has risen sharply over the last decade, as has the a minimum amount you’ll need to make a down payment. With a conventional loan, you’ll need a 20% down payment to avoid paying for private mortgage insurance (PMI), and many lenders require a minimum down payment of 3% – 5%.

However, a low down payment or low income does not have to be a barrier to homeownership. Government-sponsored enterprises Fannie Mae and Freddie Mac offer HomeReady and Home PossibleÒ loans that are available for an even lower down payment. Here, we’ll go over how HomeReady loans work, the benefits of this loan option, and how you can get one to finance your home purchase.

What is a Fannie Mae HomeReady mortgage?

A HomeReady mortgage is a loan program backed by Fannie Mae that helps home buyers reduce the up-front costs of purchasing a house. HomeReady mortgages allow for a down payment as low as 3% and are available to borrowers with lower or nontraditional incomes.

Fannie Mae created HomeReady to provide an alternative to a Federal Housing Administration (FHA) loan. An FHA loan is a type of government-backed loan, while a HomeReady mortgage is a conventional loan. FHA loans require a 3.5% down payment and require mortgage insurance that can’t be cancelled. With a HomeReady mortgage, you can cancel PMI when you reach 20% equity.

Fannie Mae HomeReady loans are similar to Freddie Mac's Home Possible, though the two government-sponsored entities use different underwriting systems.

Benefits of the HomeReady Loan program

HomeReady can help make homeownership more attainable for borrows who haven’t been able to save much of a down payment. These loans also offer lower mortgage insurance requirements, which helps lower-income buyers to get approved for a home loan. Let’s take a look at some of the biggest perks of HomeReady loans:

• You only need a 3% down payment. Some lenders require a down payment of at least 5% for a conventional loan, and FHA loans require at 3.5% down payment.
• You can apply with a lower credit score. HomeReady loans require a minimum credit score of at least 620, while some conventional loans require a credit score as high as 720.
• You may qualify for payment assistance. HomeReady loans allow you to accept gifts or grants for your down payment and closing costs and do not require you to make any personal contribution.
• You can cancel mortgage insurance. You can cancel your mortgage insurance once you’ve paid down 20% of your home’s value.

Who qualifies for a HomeReady loan?

In order to get a Fannie Mae HomeReady loan, you’ll need to meet the following eligibility requirements:

• Credit score: Minimum credit score of at least 620.
• Down payment: Minimum down payment of at least 3%.
• Income: Your income must be less than 80% the median income in your area.
• Debt-to-income ratio: Your DTI cannot exceed 50%.
• Occupancy: The home must be your primary residence.
• Homeownership education: You’ll need to attend a homeownership course to help prepare you for the financial responsibilities of buying and owning a home

What are the HomeReady loan’s income limits?

Because HomeReady loans are designed to make homeownership more attainable for lower-income borrowers, they come with certain income limits. In order to be eligible, your income cannot exceed 80% of your county’s area median income (AMI). You can determine your HomeReady eligibility by looking up your address’s AMI.

Previously, all borrowers in designated low-income areas qualified for HomeReady loans regardless of their household income, but this is no longer the case.

How to check the HomeReady income limits for your area

Fannie Mae has a tool that makes it easy for borrowers to find the HomeReady income limits in their area. All you have to do is enter the street address for the home you’re looking to buy into the Area Median Income Lookup Tool. You’ll be shown what the area median income is along with the 80% AMI HomeReady limit for that area.

For example, if you’re looking to buy a home in Andover, Massachusetts, you’ll find that the area median income is $152,100. That means that the maximum income limit for a HomeReady loan there is $121,680, which is 80% of $152,100.

How to apply for a HomeReady loan

If you think a HomeReady mortgage might be the right financing option for your home purchase, here are the steps to take to get one.

1. Review the HomeReady loan benefits and requirements 

Before you apply for a HomeReady loan, make sure you understand the qualification requirements and the pros and cons of this mortgage option. If your credit score is at least 620 and you can afford to make a down payment of at least 3%, a HomeReady loan might be a good fit for you. However, if your income exceeds the HomeReady limits, you may not be eligible.

2. Analyze your finances and gather documents

Take a look at your income, debts, and budget to determine what kind of monthly payment you can afford. Before a lender will approve you for a HomeReady mortgage, they’re going to need to see proof that you can afford to repay the loan. You can expect to be asked for the following financial documents, and preparing them in advance can help expedite the process:

• Recent pay stubs
• Recent bank statements
• Recent tax returns
• W-2 or 1099 forms

3. Find a mortgage lender

HomeReady loans are backed by Fannie Mae but are issued by private lenders. Most conventional lenders offer HomeReady mortgages, so you’ll have plenty of national and local lenders to sort through.

Rocket Mortgage® offers both HomeReady and Home Possible loans. You can learn more about our eligibility requirements and guidelines here.

4. Apply for a HomeReady loan

Once you’ve chosen a lender, it’s time to apply for a HomeReady loan. You’ll complete an application and provide supplemental documentation to verify your income, assets, and debts. Rocket Mortgage gives you the option of share your online bank account and tax information in real time to help expedite this step.

5. Wait for your approval decision

Once you’ve submitted your loan application, your lender will conduct the underwriting process to verify your financial information. If you meet their eligibility requirements and determine you’re approved, they’ll set your mortgage rate and loan amount. Then you can start shopping for a home or make an offer if you’ve already found one.

HomeReady mortgage alternatives

Fannie Mae HomeReady loans aren’t the only mortgage option for lower-income borrowers. Let’s take a look at some other loan alternatives.

HomeReady loan vs. Home Possible loan

HomeReady and Home Possible loans are both great mortgage options geared toward lower-income borrowers. The primary difference between the two is that HomeReady mortgages are backed by Fannie Mae and Home Possible mortgages are backed by Freddie Mac. The qualification requirements for HomeReady and Home Possible loans are the same, but Fannie Mae and Freddie Mac use different underwriting systems.

HomeReady loan vs. FHA loan

Both HomeReady loans and FHA loans are designed for borrowers with smaller down payments and lower credit scores. While HomeReady loans are conventional loans that are backed by Fannie Mae, FHA loans are government loans that are backed by the Federal Housing Administration. As a result, HomeReady loans and FHA loans have different eligibility criteria.

FHA loans require a slightly larger down payment but allow for a lower credit score. HomeReady loans come with income limits, which FHA loans do not. You must pay for mortgage insurance for the life of an FHA loan, but PMI on a HomeReady loan is cancellable once you hit 20% equity.

FAQ about HomeReady mortgages

If you still have more questions about HomeReady mortgages, we’ve got answers.

Are HomeReady mortgages available for all homes?

HomeReady can be applied to a variety of home types. You can purchase one- to four-unit homes as long as one of the units will be your primary residence.

You can use HomeReady for a planned unit development, townhouse, condo, and more. You can read more on the Fannie Mae website and the Freddie Mac site about the full requirements and types of homes that qualify for HomeReady and Home Possible loans.

How much do you need to put down on a HomeReady mortgage?

One of the biggest perks of HomeReady mortgages is that you only need a 3% down payment. You can also use gifts or grants to help cover your up-front costs, as no personal contribution is required.

Can you use rental income to qualify for HomeReady?

Yes. If you own an investment property, you can use rental income to help you qualify for a HomeReady loan.

Do you have to be a first-time home buyer to use a HomeReady loan?

No, you do not need to be a first-time home buyer to qualify for a HomeReady loan. Repeat home buyers are still eligible.

Can you refinance with HomeReady?

Yes, you can use a HomeReady loan to refinance your existing mortgage. However, there are limits on how much you’d be able to withdraw with a cash-out refinance using a HomeReady loan.

The bottom line: HomeReady loans allow low down payments

Fannie Mae’s HomeReady mortgages can be a great option for low- to moderate-income borrowers. If you want to buy a home but are overwhelmed by the upfront costs, HomeReady loans only require a minimum 3% down payment. You can use gifts or grants to fund your down payment, and you can cancel PMI once you’ve paid off 20% of the home’s value. However, you won’t be eligible for a HomeReady loan if your income exceeds 80% of the area median income where you’re buying.

See what you may qualify for today with Rocket Mortgage and explore your loan options for either of these programs. Don’t let saving for a down payment get in the way of buying your first home.

Client will receive a 1 point (1.000) loan level price adjustment (LLPA) credit on Home Possible and HomeReady purchase loans locked on or after January 2, 2024 HomeReady loans must close by 2/27/2026. One point (1.000) is equal to 1% of the loan amount. Minimum credit amount will be $2,000. Maximum loan amount is $350,000. Clients with HomeReady loans locked after 1/28/2026 will receive a lender credit of $2,500 when their income is below 50% of the median in their area. Offer is not available with any other discounts or promotions. Offer cannot be retroactively applied to previously closed loans or loans already in process; offer is not transferable. Rocket Mortgage reserves the right to cancel/modify this offer at any time. Additional restrictions/conditions may apply. This is not a commitment to lend.

The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.