© 2018 Fannie Mae Single Family Selling Guide
Underwriting Options
HomeReady mortgage loans can be underwritten with DU or may be manually underwritten. The maximum LTV ratio is lower for manually underwritten transactions versus those underwritten in DU (95% versus 97% for one-unit principal residences). As a reminder, the limited waiver of representations and warranties typically granted for loans underwritten with DU does not apply to manually underwritten loans.
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If the LTV, CLTV, or HCLTV ratio is greater than 80%, the minimum required borrower contribution from the borrower’s own funds is dependent on the number of units, as noted in the table below.
| Number of Units | Minimum Borrower Contribution | Minimum Down Payment Requirement 1 |
|---|---|---|
| One 2 | None | 3% 3 |
| Two | 3% | 15% |
| Three or four | 3% | 25% |
See B3See B3-4, Asset Assessment, and B5and B5-5.1-02, Community Seconds Loan Eligibility, for information about allowable sources of funds for completing the transaction.
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Non-occupant borrowers are permitted on HomeReady mortgages. See B2See B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction, for the eligibility requirements that apply.
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For HomeReady purchase transactions, at least one borrower on the loan must complete the homeownership education or housing counseling requirements described in B2in B2-2-06, Homeownership Education and Housing Counseling, Loans where at least one borrower completed housing counseling are eligible for an LLPA credit. See B5See B5-6-04, HomeReady Mortgage Loan Pricing, Mortgage Insurance, and Special Feature Codes for Codes for details.
Rental Income from the Subject Property
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one-unit principal residence with an accessory unit. See B4See B4-1.3-05, Improvements Section of the Appraisal Report, for additional details related to acceptable accessory units;
two- to four-unit principal residence properties.
See B3See B3-3.1-08, Rental Income, for calculation and documentation of rental income used for qualifying purposes.
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When sweat equity is accepted toward the down payment, the borrower must contribute at least 3% from his or her own funds. For one-unit properties, a minimum down payment of 5% is required – 2% sweat equity and maximum LTV ratio of 95%. For two- to four-unit properties, refer to the Eligibility Matrix for maximum LTV ratios.
Minimum Reserve Requirements
For manually underwritten loans, the reserve requirements are documented in the Eligibility Matrix. For DU loan casefiles, DU will determine the reserve requirement.
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The credit report indicates that the borrower’s credit score is low due to an insufficient traditional credit history (as documented by reason codes on the credit report that indicate a lack of credit accounts, accounts not opened long enough, lack of usage, etc., as reasons for the low credit score). If the borrower’s credit score is low due to derogatory credit or if none of the reason codes noted above appear on the credit report, then the minimum credit score for the transaction must be met (per the Eligibility Matrix).
The lender must supplement the traditional credit file (referred to as a “thin file”) with the development of an acceptable nontraditional credit profile in accordance with Section B3–5.4, Nontraditional Credit History.
The lender must deliver the borrower’s credit score (even if below the minimum required) along with SFC 818 at loan delivery to identify HomeReady mortgage loans that have borrowers with thin files.
Note: Special Feature Code 818 should only be used to indicate a “thin file” HomeReady mortgage loan.
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