If my wife earns just under 80% of the AMI for our area (about $1.5k below), could she apply for the mortgage alone to qualify for the HomeReady Loan?
Would it then be possible to use my income to increase her buying power and improve the DTI ratio?
We want to use her as the sole applicant to qualify for HomeReady, but we’re wondering if my income can still be added to boost affordability. Together, we exceed the income limit for HomeReady, so this is why we’re exploring this approach.
If you’re on the loan, your income will count towards the HomeReady income limits. If she can qualify on her own, great—then only her income will be considered for eligibility.
If you’re not on the loan, your income won’t be used for DTI or buying power calculations. Essentially, if her income is sufficient for the mortgage, she can qualify independently, but if not, you’ll need to look at other programs.
@Lin
She can qualify on her own—great DTI and a credit score of 750+. So does this mean there’s a sort of soft cap on the home price based on the AMI?
For example, if someone earns exactly at the 80% mark, how could they improve buying power without increasing income? Assuming rates stay steady and the borrower has a great credit score and DTI (around 6%).
@Davi
You could consider it a soft cap. One way to bypass it is by putting a larger down payment. HomeReady is attractive for its low down payment (3%) and reduced PMI costs, but it’s not designed for purchasing higher-priced homes.
If you want to maximize affordability with both incomes, HomeReady might not be the best fit. You could explore conventional loans or other programs designed for households with higher combined incomes.
@Lin
The low down payment and cancelable PMI are the main attractions for us. We’re aiming for a $350k home, which is pretty average in our area, but we don’t have a significant down payment.
Davi said: @Lin
The low down payment and cancelable PMI are the main attractions for us. We’re aiming for a $350k home, which is pretty average in our area, but we don’t have a significant down payment.
In that case, you’ll need to focus on homes priced within what can be approved with just her income. Another option is refinancing any joint debts into your name only, so they don’t impact her DTI.
If these options don’t work, you might need to look into standard conventional loans or other programs that don’t have AMI restrictions.
Happy to help! Quick follow-up: Is your base salary higher than your wife’s, and does it exceed the AMI limits?
If only base pay is needed for qualification, you could exclude bonuses, commissions, or overtime to stay within the limits and increase affordability.
@Davi
Another way to increase buying power is by putting more down, but that somewhat negates the benefits of the program. HomeReady/HomePossible are more beneficial for those with lower credit, as they waive LLPAs that would otherwise raise interest rates.
The short answer is no. If your income is required for qualification, it will count towards the AMI limits. You might want to explore other programs with higher or no AMI limits.
Unfortunately not. You could look into the HomeOne program. It still offers a 3% down payment option but doesn’t have income limits. Check with a local mortgage broker for more details.
Bao said:
Unfortunately not. You could look into the HomeOne program. It still offers a 3% down payment option but doesn’t have income limits. Check with a local mortgage broker for more details.
Check out the Georgia Dream and Peach Plus programs. They have income limits of $120k and $180k, which might work better for you compared to the Fannie/Freddie limits.
@Teo
This is a solid option for your location. There’s no workaround for HomeReady income limits other than not using bonus or overtime pay when qualifying.