HomeReady Mortgages: Your Best Low Down Payment Option in 2025

Want to buy a home in 2025 but feel like there are too many financial obstacles standing in the way? Then I have good news: the Fannie Mae HomeReady mortgage is built to help. Yes, down payments, closing costs, and high monthly payments thanks to 6%+ rates in 2025 can make ownership feel out of reach. That’s exactly why Fannie Mae created the HomeReady mortgage—a program designed to put the keys in more hands without forcing buyers to wait years to save.

If you’ve been searching for a low down payment mortgage that doesn't come with a high rate, the HomeReady progam deserves a serious look. It’s flexible, accessible, and built for today’s buyers who may not have perfect credit, six figure incomes or enough for a 20% down payment. And if you’re buying a home and looking at your options, understanding the HomeReady Mortgage program vs the HomePossible program from Freddie Mac can make all the difference in becoming a first time homeowner vs renting for another year.

What Is a HomeReady Mortgage?

The Fannie Mae HomeReady program is a conventional loan with a twist: it allows buyers to purchase with as little as 3% down. That’s even less than FHA’s 3.5% minimum. But it’s not just about the down payment. HomeReady comes with underwriting flexibilities that make qualifying easier for households with moderate incomes.

Here are the basic rules:

• Down payment: A minimum of 3% is required, which means you can get into a home with far less cash than the traditional 20%. On a $300,000 home, that’s just $9,000. This lower entry point allows buyers to redirect savings toward closing costs, moving expenses, or an emergency cushion.

• Income limits: To qualify, your household income must be no more than 80% of your area’s median income (AMI). This limit ensures the program targets moderate-income families who need the most help. For example, in Travis County, Texas, where the AMI is $115,400, you’ll qualify if your household income is $92,320 or less. Each county has its own threshold, which can be checked with Fannie Mae’s AMI lookup tool.

• Credit score: You don’t need perfect credit to qualify. With scores starting at 620, HomeReady opens the door to borrowers who might have been turned away by stricter programs. But keep in mind: a lower score almost always means a higher rate. Ideally, any borrower—regardless of income or loan program—should aim for a credit score above 700 to unlock the best terms. Just because you can qualify with a lower score doesn’t mean you should settle for one. The stronger your credit, the lower your cost of borrowing will be.

• Debt-to-income ratio (DTI): HomeReady allows a DTI up to 50%, higher than many conventional loans. This means lenders recognize that modern households often juggle student loans, car payments, or childcare while still managing a mortgage. The higher cap gives buyers more breathing room in qualifying.

• Homeownership education: First-time buyers must complete a short online class that covers budgeting, loan basics, and what to expect after closing. It’s a one-time requirement that prepares buyers for success and can even serve as a confidence booster for those new to the process.

• Primary residence requirement: HomeReady loans can only be used for a borrower’s primary residence—not for second homes or investment properties.

And yes, repeat buyers can use it too, as long as they meet the income rules.

Who Qualifies for HomeReady?

Unlike some niche programs, HomeReady isn’t just for first-time buyers. Here’s who can benefit:

• First-time buyers who don’t have 20% saved.

• Repeat buyers who meet the income and property requirements and want to take advantage of a lower down payment option.

• Moderate-income households earning below 80% AMI.

• Multigenerational families who want to include a parent or child as a co-borrower (even if that person won’t live inthe home).

• Buyers with roommates or ADUs—HomeReady can count documented rent from boarders or an accessory dwelling unit toward qualifying income.

For Texas buyers, this opens doors in high-cost counties like Travis, Collin, and Harris where property taxes are steep and saving for a large down payment is nearly impossible while renting.

Benefits of HomeReady vs. FHA Loans

FHA has been the go-to low-down-payment mortgage since 1934. But in 2025, HomeReady beats FHA in key ways:

• Lower Mortgage Insurance (MI): FHA requires upfront and lifetime mortgage insurance. HomeReady’s PMI can be canceled once you hit 20% equity, meaning you’re not saddled with a monthly cost forever. Over the life of the loan this difference can add up to tens of thousands in savings.

• Lower Down Payment: 3% vs FHA’s 3.5%. That half-percent may not sound like much, but on a $400,000 home it’s $2,000 less cash you need to bring to the table. For many buyers, that’s the difference between buying now or waiting another year.

• Flexibility with income: HomeReady allows non‑traditional income sources—like boarder rent or a non‑occupant co‑borrower—to help you qualify. FHA doesn’t recognize these options in the same way, which can limit borrowing power.

• More property types: Condos, co‑ops, and multi‑unit homes qualify under HomeReady with fewer restrictions than FHA, which has its own condo approval list and stricter rules for certain properties.

That said, FHA still wins if your credit score is very low (as low as 580 with 3.5% down). FHA can be a lifesaver for buyers rebuilding credit. But for buyers with 620+ credit, HomeReady is usually the cheaper, smarter play because it combines lower upfront costs, cancellable PMI, and more flexible guidelines that reflect how households actually earn and share income today.

HomeReady vs. Home Possible

Before we compare, it helps to know what Home Possible actually is. Freddie Mac’s Home Possible program is their version of a low down payment conventional mortgage. Like HomeReady, it lets you buy with just 3% down and is designed for moderate-income households. The rules are nearly identical: income capped at 80% of area median, cancellable private mortgage insurance, and an emphasis on first-time buyers. Where the two differ are in the fine print.

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible look almost identical at first glance. Both allow 3% down and cap income at 80% AMI. But there are subtle differences:

Bottom line: If your credit score is between 620–659 or you’re counting on rental income from a roommate or ADU, HomeReady is more flexible. If you’re over 660, both programs perform similarly.