Understanding PMI & HomeReady ProgramIn the world of home buying, PMI or Private Mortgage Insurance is often a necessary evil. This insurance protects the lender in case of a borrower’s default. It is typically required for those who put down less than 20% on their home purchase. However, with the introduction of the HomeReady program, PMI for eligible borrowers has become more affordable and manageable.
Breaking Down PMI for HomeReadyOne of the most significant benefits of the HomeReady program is the reduction of PMI payments. With traditional mortgages, PMI can vary in cost depending on the borrower’s credit score and the amount they put down. However, for HomeReady borrowers, PMI is just a flat rate of $160 per month. This amount is significantly less than what a traditional mortgage borrower might pay per month in PMI. Key point: HomeReady borrowers can save up to $70 per month in PMI payments compared to those with traditional mortgages.
How HomeReady Program WorksHomeReady’s main goal is to make homeownership more achievable for those who may not have a substantial down payment or a great credit score. The program helps borrowers by allowing them to include income from non-borrowers, such as family members or friends, to help qualify for the loan. This approach is known as “income-sharing” and can make it easier for eligible borrowers to meet the maximum debt-to-income ratio requirement of 50%. Another feature of the program is that it requires borrowers to complete a homebuyer education course. This education course can help borrowers better understand the home buying process, learn about financing terms, and help them make informed decisions as they navigate the often-complicated mortgage process.
Benefits of HomeReady for BuyersThe HomeReady program offers an array of benefits for eligible borrowers. These include:
- Lower PMI payments
- Below-market interest rates
- Income-sharing options
- More flexible qualification requirements
- The option to complete a homebuyer education course