Although the HomeReady Program offers more flexible qualification guidelines than a standard mortgage, it is unlikely that a full-time college student could use the program to buy a home for multiple reasons.
To qualify for a HomeReady mortgage, or any mortgage for that matter, lenders typically require a two year employment history. Although full-time education, such as attending college, and military service count as employment history when you apply for a mortgage, lenders usually require that your income comes from a continuous full-time job as opposed to part-time employment or a summer job.
Review our HomeReady Mortgage Guide
So if a college student has a permanent full-time job, or a permanent part-time job that pays exceptionally well, she or he may be able to qualify for a HomeReady mortgage, but otherwise the chances of being approved are very low.
As referenced in your question, the HomeReady Program does permit non-traditional income sources including rental income from a boarder or roommate to qualify for the mortgage. To use include roommate or boarder income in your loan application, you must document that the roommate or boarder shared a residence with the applicant for the past twelve months and you are also required to document the boarder income for at least nine of those twelve months.
Please note that the boarder income is averaged over twelve months when less than twelve months of rent payments are documented. You are also required to provide cancelled checks or bank statements to verify the boarder income.
Additionally, according to HomeReady Program guidelines, boarder income can represent a maximum of 30% of an applicant's total income. So if you expect to use roommate rents for the majority of your income for the mortgage, you would not qualify, especially if your personal income is relatively low.
In short, if your plan is to buy a home and rent out rooms to people who you have not lived with or collected rent from for the past twelve months, you would not be approved for a HomeReady mortgage.
The HomeReady Program is offered by participating lenders. Contact multiple lenders in the table below as program availability and eligibility guidelines vary.
HomeReady also allows you to use income from a non-occupant co-borrower such as a parent or relative to qualify for a mortgage. In this case, the co-borrower is on the mortgage as well as the property title but does not live in the property. The co-borrower’s credit score, monthly gross income and debt expenses are factored into loan application. A co-borrower with a high credit score, steady income and relatively low monthly debt payments may help you qualify for the HomeReady Program or afford a higher loan amount.
Use the FREEandCLEAR Lender Directory to search by lender type and loan program. For example, you can search for lenders that offer 25 loan programs, including HomeReady.
The drawback to this approach if the occupying borrower -- the applicant who lives in the property -- is a college student is that she or he may not earn sufficient income to qualify as a borrower. If the lender does not use the income from the college student, then this is the same as the non-occupant co-borrower applying for a mortgage on a rental property. The HomeReady Program only applies to owner occupied properties and rental properties are not eligible.
If the college student earns enough income from permanent employment, then the co-borrower option may be your only option to use HomeReady to buy a home, but your chances of being approved for the mortgage are still relatively low.
Given the challenges for a college student to qualify for the HomeReady Program as outlined above, you should consider applying for a standard investment property mortgage with a co-borrower. Investment property mortgage rates are higher than the rate on your primary residence, but you are more likely to get approved for the mortgage if you use the right loan program.
The table below outlines investment property mortgage terms. We recommend that you contact multiple lenders to learn more about qualification requirements. Shopping for your mortgage also enables you to find the lowest rate and fees.
"HomeReady Mortgage." Mortgage Products. Fannie Mae, 2020. Web.« Return to Q&A Home About the author