Fannie Mae Unveils $2,500 Homebuying Credit: Do You Qualify? | Mortgages and Advice

Fannie Mae has announced an update to its HomeReady mortgage product that could save certain borrowers thousands of dollars on upfront homebuying costs – but this offer is only available for a limited time.

In a lender letter issued Wednesday, the mortgage giant unveiled a temporary $2,500 credit for low-income homebuyers that can be used toward a down payment and closing costs, “two of the greatest barriers to homeownership,” according to Fannie.

The credit is effective for Fannie Mae HomeReady mortgage loans delivered after March 1 through February 2025, and is available to borrowers who earn at or below 50% of the area median income where the property is located. Keep reading to determine if you might qualify for this new credit.

The temporary $2,500 credit is available exclusively through Fannie Mae’s HomeReady mortgage product. HomeReady is a type of conventional loan issued by participating lenders and offers flexible underwriting criteria for borrowers who meet certain eligibility requirements:

• Down payment. HomeReady mortgages require a minimum down payment of 3%, which is ever so slightly lower than the 3.5% down payment needed for Federal Housing Administration loans. The $2,500 credit may be used toward the 3% down payment requirement.

• Credit score. HomeReady requires a minimum FICO credit score of 620 or higher. Fannie Mae has a list of lenders that will determine if your on-time rental payment history can help you qualify for a mortgage.

• Mortgage insurance. HomeReady borrowers with a down payment of less than 20% are required to carry mortgage insurance, although the premiums are reduced once the borrower reaches a loan-to-value ratio of 90% and canceled once they meet 80% equity. By comparison, FHA mortgage insurance may be required during the duration of the loan.

• Repeat or first-time buyers. You don’t need to be a first-time homebuyer to qualify for a HomeReady mortgage. But if all borrowers on the loan are first-time buyers, then at least one is required to take a homeownership education course, such as Fannie Mae HomeView.

If you meet the eligibility criteria outlined above, it’s worth taking advantage of this temporary credit to reduce your out-of-pocket homebuying costs. But you can’t apply for the program directly through Fannie Mae – you’ll have to find a mortgage lender that participates in HomeReady. Fortunately, most lenders offer HomeReady loans, so just be sure to check with your mortgage loan officer before starting the preapproval process.

It’s a good idea to get preapproved through multiple HomeReady mortgage lenders so you can compare loan estimates and shop around for the best terms possible for your financial situation.

Once you’ve identified the lender you want to work with, the process for redeeming the credit is fairly straightforward. The lender will confirm your eligibility and apply the credit toward your down payment and closing costs, like escrows and mortgage insurance premiums. In other words, the credit reduces your “estimated cash to close,” found on Page 1 of your loan estimate.

The credit is funded by Fannie Mae, which reimburses to the lender via loan-level price adjustments, or LLPAs. Keep in mind that the program runs through February 2025, and there’s no telling yet whether the credit will be extended beyond then.