Why choose HomeReady® mortgage? Competitive pricing. Flexible options. Conventional ease.HomeReady® is our affordable, low down payment mortgage product designed for creditworthy low-income borrowers.

HomeReady benefits• Low down payment; as little as 3% down for home purchases

• Flexible sources of funds with no minimum contribution from borrower’s own funds

• Non-occupant borrowers permitted

• Cancellable mortgage insurance (restrictions apply)

• Reduced MI coverage requirement for loan-to-value ratios above 90% (up to 97%)

• Pricing is better than or equal to Fannie Mae’s standard loan pricing (risk-based pricing waivers

for LTV ratios > 80% with a credit score ≥ 680)

Benefits HomeReady FHA

Cancellable mortgage insurance* Yes No

Lender can order the appraisal immediately Yes No

No geographic restrictions on loan amounts Yes No

Day 1 Certainty™ freedom from certain reps & warrants Yes No

*Restrictions apply.

All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern.

A HomeReady mortgage is an ideal low down payment option for low-incomeborrowers. It puts responsible homeownership within reach for those with modest savings and supports long-term success.

Notes:

If your borrower meets some of the criteria, they may be a good candidate for HomeReady.

Criteria Yes No

Limited cash for down payment (as low as 3 %)

Credit score � 620; borrowers with credit scoresof 680+ may get even better pricing

Low income

First-time or repeat homebuyer

Non-household friends, relatives or loved ones prepared to be co-borrowers

Has gifts, grants or Community Seconds®

to use toward down payment

Receives rental unit or boarder income

Wants to refinance to lower monthly payments

Borrower checklist

Visit fanniemae.com/homeready for more details

Fannie Mae®

| HomeReady®

Sample borrower payment scenario: FHA, HomeReady, and Fannie Mae standard

30-year fixed-rate scenarioPurchase price: $200K

FHA mortgageNote rate: 4.25%

LTV: 96.50%

HomeReady MortgageNote rate: 4.50%

LTV: 97%

Fannie Mae standardNote rate: 4.875%

LTV: 97%*

Base loan amount $193,000 $194,000 $194,000

Upfront MIP rate (%) 1.75% 0% 0%

Upfront MIP cost ($) $3,377.50 $0 $0

Total loan amount $196,378 $194,000 $194,000

Down payment $7,000 $6,000 $6,000

Monthly MI rate (%) 0.85% 0.77% 0.96%

Monthly MI ($) $137 $124 $155

Principal/interest monthly payment $966 $983 $1,027

Monthly payment $1,103 $1,107 $1,182

After approximately 5 years … with an annual home appreciation rate of 3%**

Monthly MI premium $137Cannot be canceled $0 $0

Total monthly payment $1,103 $983 $1,027

* The borrower must be a first-time home buyer to be eligible for a 97% LTV Fannie Mae standard loan; for non-first–time home buyers, the maximum LTV is 95%.

**Assuming 3% annual home appreciation, the loan would reach an LTV ratio below 80% after approximately 61 months.

NOTE: FHA loans allow credit scores of 580 or higher. The minimum credit score for a Fannie Mae loan, including HomeReady, is 620; this example uses a 700 credit score. FHA MIP rate effective January 20, 2017; see Mortgagee Letter 2017-07: www.hud.gov/sites/documents/17-07ml.pdf. Note rates based on observed market rates as of May 2018 and adjusted to cover applicable loan-level price adjustments. FHA Upfront MIP cost is typically financed into the loan amount.

Visit fanniemae.com/homeready to learn how HomeReady can help you grow your business.

© 2019 Fannie Mae. Trademarks of Fannie Mae.

HomeReady Mortgage Built for today’s home buyers

Meet the diverse needs of today’s buyers and grow your business with the HomeReady® mortgage, our premier affordable lending product designed for creditworthy low-income borrowers.

Features

© Fannie Mae 2019. Trademarks of Fannie Mae. July 2019 | Page 1 of 2

Lender Fact Sheet

The 97% financing option and low mortgage insur-ance coverage are just two of the benefits as compared to traditional conventional loan programs.

— Mat Ishbia President/CEO, United Shore

• Financing up to 97% loan-to-value (LTV) for purchase of one-unit principal residence (Desktop Underwriter® (DU®) is required for LTV ratios >95%); up to 95% LTV for limited cash-out refi (LCOR) and up to 97% LTV for LCOR transactions in DU when the mortgage being refinanced is owned or guaranteed by Fannie Mae

• Borrower is not required to be a first-time buyer

• Cancellable mortgage insurance (restrictions apply); lower MI coverage (25% for LTVs >90% to 97%) compared with standard requirements

• Gifts, grants, Community Seconds®, and cash-on-hand permitted as a source of funds for down payment and closing costs

• Supports HomeStyle® Energy, manufactured housing, and HomeStyle® Renovation

• Innovative underwriting flexibilities expand access to credit responsibly. Flexibilities include rental unit and boarder income, as well as non-occupant borrowers, such as parents.

Lender Benefits Borrower Benefits

CertaintyUnderwrite with confidence – DU automatically identifies potential HomeReady-eligible loans and provides a credit risk assessment.

AffordabilityGet pricing that’s better than or equal to Fannie Mae’s standard loan pricing. Take advantage of risk-based pricing waivers for LTV ratios >80% with a credit score >= 680.

SimplicityCombine standard and HomeReady loans into MBS pools and whole loan commitments.

SustainabilityExpand access to credit responsibly with homeownership education and housing counseling options for borrowers.

Low down paymentAs low as 3% down payment for home purchase and refinance transactions.

Flexible sources of fundsCan be used for the down payment and closing costs with no minimum contribution required from the borrower’s own funds (1-unit).

Affordable and cancellable monthly MIReduced MI coverage requirement above 90% LTV; cancellable MI per Servicing Guide policy.

Homeownership educationThe online Framework® course prepares borrowers for sustainable homeownership; other education and housing counseling options are available.

Homeownership education requirement

© Fannie Mae 2019. Trademarks of Fannie Mae. July 2019 | Page 2 of 2

Simple borrower income eligibilityHomeReady is available when purchasing or refinancing any single-family home, as long as the borrower meets the income limits of the property location. (Income eligibility limits may help lenders meet applicable Community Reinvestment Act goals.) The Income Eligibility Lookup tool provides lenders and other housing professionals with a quick and easy way to look up HomeReady income eligibility by address or FIPS code.

Borrower income eligibility limit

Area median income (AMI)

HomeReady income limit 80% of AMI (all areas)

Knowledge is power. That’s why the HomeReady mortgage homeownership education requirement is designed to help borrowers gain essential knowledge to prepare for sustainable homeownership and lenders gain informed borrowers prepared to successfully navigate the loan process.

The Framework course makes it simple to meet the requirement

At least one borrower on each HomeReady purchase transaction must complete the Framework online education program (see exceptions below).

Exceptions: For HomeReady loans that involve a Community Seconds or down payment assistance program, buyers may instead complete the homeownership education course or counseling required by the Community Seconds or down payment assistance program as long as it is provided by a HUD-approved agency and completed prior to closing.

In addition, the presence of a disability, lack of Internet access, and other issues may indicate that a consumer is better served through other education modes (for example, in-person classroom education or via a telephone conference call). In such cases, lenders should direct buyers to Framework’s toll-free customer service line (855-659-2267), which can refer consumers to a HUD-approved counseling agency.

Finally, buyers who have already completed housing counseling prior to entering a sales contract are not required to complete the Framework course. See below for more details on counseling requirements.

Benefits of housing counseling

We believe housing counseling from a HUD-approved nonprofit housing counseling agency can help to expand the pool of mortgage-eligible buyers.

In addition to helping borrowers prepare for sustainable homeownership and fulfilling the HomeReady home-ownership education requirement, housing counseling can provide a benefit to lenders, too. Exclusively for HomeReady purchase transactions on which buyers have received customized assistance from HUD-approved nonprofit counseling agencies before entering into a sales contract, lenders will receive a $500 loan-level price adjustment credit for HomeReady loans delivered with Special Feature Code 184.

Learn Morefanniemae.com/homeready

Frequently Asked Questions

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 1 of 9

HomeReady FAQs Listed below are common questions about the features, requirements, and benefits of the HomeReady® mortgage, our low down payment mortgage product designed for creditworthy, low-income borrowers. For details on the HomeReady required homeownership education, refer to the Homeownership Education FAQs. To navigate to a specific section, click on the links below.

Contents

General ................................................................................................................................................................................... 1

Income Eligibility .................................................................................................................................................................... 3

Eligibility and Underwriting ................................................................................................................................................... 3

Borrower Income and Assets ............................................................................................................................................................. 4

Nontraditional Credit ......................................................................................................................................................................... 4

Property Type ......................................................................................................................................................................... 5

DU Requirements ................................................................................................................................................................... 6

Mortgage Insurance ............................................................................................................................................................... 7

Pricing ..................................................................................................................................................................................... 7

Committing and Delivery ....................................................................................................................................................... 7

Homeownership Education ................................................................................................................................................... 8

Servicing ................................................................................................................................................................................. 9

Lender Resources ................................................................................................................................................................... 9

General

Q1. What are HomeReady’s lender benefits?

HomeReady helps lenders confidently serve today’s market of creditworthy, low-income borrowers. HomeReady offers lenders

▪ Certainty: Underwrite with confidence – DU automatically identifies potential HomeReady eligible loans and provides a credit risk assessment.

▪ Competitive pricing: Get pricing that’s better than or equal to our standard loan pricing. Take advantage of risk-based pricing waivers for LTV ratios > 80 percent with a credit score >= 680.

▪ Simplicity: Combine standard and HomeReady loans into MBS pools and whole loan commitments. ▪ Sustainability: Expand access to credit responsibly with homeownership education and advising options for

borrowers.

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 2 of 9

Q2. What are HomeReady’s borrower benefits?

HomeReady serves low-income borrowers.

▪ HomeReady features pricing that is better than or equal to standard loan pricing.

▪ Lower than standard MI coverage requirements for loans with LTVs greater than 90 percent up to 97 percent.

▪ Cancellable monthly MI payments (per Servicing Guide policy; generally upon borrower request when the loan balance drops below 80 percent LTV, or automatically when it drops below 78 percent).

▪ Innovative underwriting flexibilities, including rental unit and boarder income, expand access to credit responsibly.

Gifts, grants, and Community Seconds® can be used as a source of funds for down payment and closing costs, with no minimum contribution required from the borrower’s own funds (1-unit properties). Any eligible loan may have more than one Community Seconds (i.e., third lien) up to the maximum 105 percent CLTV (see Community Seconds fact sheet). Cash-on-hand can also be used for down payment and closing costs (1-unit properties).

Q3. May any Fannie Mae lender originate HomeReady mortgages?

Yes. HomeReady mortgages are available to all approved Fannie Mae sellers with details in the Selling Guide. Note, however, that use of the HomeStyle® Renovation product in conjunction with HomeReady requires that the lender be specifically approved by Fannie Mae to originate HomeStyle Renovation loans.

Q4. Has Fannie Mae targeted particular markets for HomeReady?

The HomeReady product is available nationwide and is designed to serve borrowers across the country. Borrower income eligibility limits are based upon the area median income of the census tract in which the property is located; limits are aligned with Fannie Mae’s regulatory housing goal of supporting low-income borrowers.

Q5. Selling Guide Announcement SEL-2016-06 states that entities such as banks with Community Reinvestment Act

requirements or other institutions with regulatory commitments to provide funds for community development

purposes may be eligible to provide lender-funded grants and down payment assistance on a case-by-case basis

for HomeReady loans, provided such lender-funded grants are not funded through the mortgage transaction and

are funded through a lender’s own funds (e.g., the borrower is not charged a higher Note Rate to fund the

assistance). How should a lender go about determining that a program will be acceptable to Fannie Mae?

Lenders must contact their Fannie Mae customer account team to discuss the possibility of obtaining a variance before originating any loans that have a lender-funded grant or down payment assistance. In addition to the requirements noted in the question above and outlined in the Announcement, to be considered for a variance, the lender must be a bank depository or credit union that is not already affiliated with a 501(c)(3) nonprofit organization that provides down payment assistance funds, unless the lender can provide strong compensating factors for further consideration.

Q6. Does HomeReady allow a limited cash-out refinance (LCOR) of a Fannie Mae to Fannie Mae loan up to a 97 percent

LTV ratio?

HomeReady allows LCORs up to 97 percent LTV in DU; only for loans owned or securitized by Fannie Mae. Follow the standard guidelines per Selling Guide section B2-1.2-02.

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 3 of 9

Income Eligibility

Q7. What are the income eligibility requirements for HomeReady borrowers?

Effective July 20, 2019, the income limit for all HomeReady loans is 80% of area median income (AMI) for the property’s location, including properties in low-income census tracts.

On the HomeReady page, the Income Eligibility Lookup tool provides lenders and other housing professionals with a quick and easy way to determine potential borrower eligibility. Simply use the tool to look up census tract income eligibility by property address or by Federal Information Processing Standards (FIPS) code. Eligibility by census tract is shown in the Income Eligibility by Census Tract Lookup, and income eligibility is identified in Desktop Underwriter® (DU®).

Q8. How can lenders determine income eligibility for HomeReady?

For loan casefiles underwritten through DU, income eligibility is determined based on the area median income of the subject property data, or FIPS code provided on the loan application. A field on the Additional Data screen in the Desktop Originator® (DO®)/DU User Interface gives lenders the ability to enter census tract information if DU is unable to standardize the property address. When the subject address cannot be standardized, and a census tract cannot be determined, but the state and zip code are provided, DU will use the AMI for the county associated to the center location of the zip code provided to estimate HomeReady eligibility. If the subject property is not located in the county identified, the user must provide the complete property address or a complete/updated FIPS code on the loan application and resubmit the loan casefile to DU. DU will then use the information provided to determine the census tract or county.

When determining whether a mortgage is eligible under the borrower income limits, lenders must count the income from any borrowers listed on the mortgage note whose income is considered in evaluating creditworthiness for the mortgage loan.

The HomeReady Income Eligibility Lookup tool provides lenders and other housing professionals with a quick and easy way to determine potential borrower eligibility for HomeReady. Simply use the tool to look up census tract income eligibility by property address or by Federal Information Processing Standards (FIPS) code.

Also on the HomeReady page, an Income Eligibility by Census Tract Lookup (spreadsheet) is provided to allow lenders to check eligibility in advance of DU submission or to determine eligibility for manually underwritten loans. The property census tract is usually provided on the appraisal.

Eligibility and Underwriting

Q9. Can HomeReady loans be manually underwritten?

Yes, manual underwriting is allowed, although we expect the vast majority of loans to be underwritten through DU. Certain HomeReady transactions – such as LTV ratios exceeding 95 percent, manufactured housing, and high-balance mortgage loans – must be underwritten through DU.

Q10. May borrowers have an ownership interest in other residential property at the time of loan closing?

Yes, borrower(s) who intend to occupy the property may have an ownership interest in other residential properties, but may only have a total of one other financed property (in addition to the subject property) at the time of closing. Non-occupant borrower(s) are not subject to this restriction.

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 4 of 9

Borrower Income and Assets

Q11. What borrower income flexibilities are unique to HomeReady?

Acceptable income sources permitted only for HomeReady loans include rental income from a 1-unit property with an accessory dwelling unit (such as a basement apartment) and boarder income (guidelines provide documentation flexibility).

Q12. Must the accessory unit be in compliance with local zoning requirements?

One-unit properties with accessory units are eligible for delivery to Fannie Mae, including instances in which the accessory unit does not comply with zoning requirements. The appraisal report must meet specified requirements. Refer to Selling Guide section B4-1.3-05 for details.

Q13. If the borrower is purchasing a 1-unit property with an accessory unit but does not have a lease to document

rental income, what documentation can be used to determine the amount of rental income to be used for

qualifying purposes?

Lenders may obtain a Fannie Mae Single-Family Comparable Rent Schedule (Form 1007) from the appraiser. Even though the form applies to a single-family investment property, Fannie Mae will accept the use of this form with an explanation from the appraiser that the estimated market rent is for the rental of an accessory unit on a 1-unit, principal residence property, and that the information reported on the form is specific to the accessory unit. Rental income used for qualifying purposes can then be calculated in accordance with Selling Guide section B3-3.1-08, Rental Income.

Q14. What documentation is required for boarder income?

For boarder income to be eligible, there must be documented evidence of prior shared residency for the most recent 12 months. The flexibility provided allows for documentation of the boarder income to be from at least nine of the most recent 12 months and averaged over 12 months. This is to provide support in instances where the boarder has lived with the borrower for 12 months, but is unable to provide a full 12 months’ worth of documentation.

Q15. Are there any changes to the existing cash-on-hand documentation requirements?

There are no policy changes associated with the use of cash on hand. Cash on hand remains an acceptable source of funds for the borrower’s down payment, closing costs and/or prepaid items. The lender must verify and document that the borrower customarily uses cash for expenses and that the amount of funds saved is consistent with the borrower’s previous payment practices, and must follow other requirements of Selling Guide section B5-6-03. Using cash-on-hand as an asset in DU is permitted on HomeReady loan casefiles; this flexibility is exclusive to HomeReady mortgages.

Nontraditional Credit

Q16. Is nontraditional credit permitted for HomeReady?

Borrowers with nontraditional credit are eligible for HomeReady, and can be underwritten manually or through DU. Refer to the Selling Guide for details.

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 5 of 9

Q17. How do we define nontraditional credit?

If a borrower has no credit score due to a lack of credit history with the credit repository, a nontraditional credit profile may be established.

Q18. What types of nontraditional credit are allowed?

For loans underwritten through DU:

• If at least one borrower has a credit score, no sources of nontraditional credit are required if the borrower with a credit score is contributing more than 50 percent of qualifying income. Otherwise, two sources of nontraditional credit are required for the borrower without a credit score (one of which must be housing-related).

• For underwriting through DU, if no borrower has a credit score, each borrower must have two sources of nontraditional credit and at least one must be housing-related.

For manual underwriting, an acceptable nontraditional credit profile must be established for each borrower without a credit score. A minimum of three sources of nontraditional credit are required for HomeReady loans. If a borrower does not have a housing-related source of credit, a minimum 12 months of reserves are required.

Property Type

Q19. What is the maximum LTV ratio for 2- to 4-unit properties?

HomeReady eligibility for 2- to 4-unit properties (purchase or limited cash-out refinance) is aligned with standard eligibility (2-unit limited to 85 percent FRM or ARM; 3- to 4-unit limited to 75 percent FRM or ARM).

Q20. Is there a minimum contribution requirement for borrowers buying a 2- to 4-unit home?

There is a 3 percent minimum borrower contribution on 2- to 4-unit HomeReady properties with LTV ratios exceeding 80 percent. Standard business requires a 5 percent minimum borrower contribution. There is no minimum borrower contribution if the LTV is 80 percent or less on either HomeReady or standard business.

Q21. As with a 1-unit home, may rental income for 2- to 4-unit properties be used with a HomeReady mortgage?

Rental income may be used from a 2- to 4-unit property with HomeReady, as well as standard business. For HomeReady loans, rental income also may be used on a 1-unit property if there is an accessory unit (such as a basement apartment), and boarder income can be used for qualifying if there is an individual residing with the borrower who will continue to reside with the borrower in the subject property.

Q22. Can a Community Seconds loan be used with a HomeReady loan secured by a manufactured home up to a 105

percent combined loan-to-value (CLTV) ratio?

A Community Seconds can be used in conjunction with a HomeReady loan secured by a manufactured home; however, the maximum LTV and CLTV ratios are limited to 95 percent. When HomeReady is combined with a manufactured home, the more restrictive eligibility applies. For example, the loan must be underwritten in DU (manufactured housing requirement), the maximum LTV and CLTV ratios are limited to 95 percent (manufactured housing requirement), the transaction is limited to a 1-unit principal residence (manufactured housing requirement), and the transaction must be a purchase or limited cash-out refinance (HomeReady requirement).

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 6 of 9

Q23. Are community land trusts eligible for HomeReady financing?

Yes. When used in combination with down payment assistance programs and community land trust properties, HomeReady creates a robust value proposition supporting affordable housing. For information on our community land trust guidelines, see the Community Land Trusts fact sheet. For more information on community land trusts, visit the National Community Land Trust Network.

DU Requirements

Q24. How does DU provide automated identification of loans potentially eligible for HomeReady?

Based on a comparison of the income limit for the area in which the property is located and the total qualifying income on the loan casefile, DU notifies users when a loan casefile appears to be eligible for HomeReady, but the lender has not underwritten the loan casefile as HomeReady. The lender would then need to resubmit the loan casefile as a HomeReady loan to obtain the appropriate HomeReady messaging.

Q25. Does DU specify when a loan casefile is not eligible for HomeReady?

When the lender selects HomeReady as the Community Lending product in DU and the loan casefile receives an Ineligible recommendation, DU issues a message specifying the reason the loan casefile is ineligible.

Q26. When and how should the FIPS code be entered?

Lenders may use the FIPSCodeIdentifier field in DU to provide the Federal Information Processing Standard Code – or FIPS code – which is a unique code assigned to all geographic areas. The first two digits of the FIPS code indicate the state number; the next three, the county number; and the last six indicate the census tract number. For example, the FIPS code for 3900 Wisconsin Ave. NW, Washington, DC, is 11001001002 (State code 11, county code 001, and census tract 001002).

Enter all 11 digits of the FIPS code, with no periods, spaces, or dashes.

The FIPS code is not required, but it can be used if DU is unable to determine the census tract. When the FIPS code is provided, DU uses that census tract to determine the AMI to be used in the income eligibility determination.

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 7 of 9

Mortgage Insurance

Q27. What are the MI coverage requirements for HomeReady?

Standard MI coverage is required on HomeReady loans with LTV ratios at or below 90 percent, and 25 percent coverage is required for LTV ratios exceeding 90 percent, which is lower than Fannie Mae’s standard MI coverage levels of 30 percent for LTV ratios of 90.01–95.00 percent and 35 percent for LTV ratios of 95.01–97.00 percent that apply to most loans.

The MI coverage levels for HomeReady were specifically designed to work in conjunction with the use of the lender’s standard base guaranty fee and the loan-level price adjustment (LLPA) structure with certain waivers and caps.

All MI types (e.g., monthly, single, split) and lender-paid MI are allowed for HomeReady.

Q28. Can lenders use the Minimum MI Coverage Option with HomeReady?

Yes, the Minimum MI Coverage Option (see the LLPA Matrix) may be used, but the LLPAs associated with it are not waived or considered toward the LLPA cap for HomeReady loans.

Pricing

Q29. What is the HomeReady pricing structure?

HomeReady pricing uses the lender’s base guaranty fee. LLPAs are waived for HomeReady loans that have an LTV ratio greater than 80 percent and a credit score of 680 or higher. For other HomeReady loans, Fannie Mae’s standard LLPAs apply, with a cap of 1.50%. (The Minimum MI coverage option LLPA is not waived if that option is used.)

Committing and Delivery

Q30. Do lenders need to deliver HomeReady loans into separate MBS contracts?

No, lenders can commingle standard and HomeReady loans into MBS pools and whole loan commitments.

Q31. Do lenders need to take down a separate whole loan commitment for HomeReady loans?

No, HomeReady has no separate whole loan committing product/pricing grids. Refer to the HomeReady product matrix for more information.

Q32. Are there limits on the percentage of HomeReady loans that can be delivered into an MBS pool or against a whole

loan commitment?

No. There is no limit on the percentage of HomeReady loans that can be delivered.

Q33. How are HomeReady loans identified at delivery?

When delivering a HomeReady loan in Loan Delivery, you must provide special feature code (SFC) 900. In addition, as part of the delivery data for the HomeReady product, lenders need to ensure that ULDD Sort ID 238 – LoanAffordableIndicator – is set to “True,” for any mortgage where the borrower completes homeownership education through Framework or housing counseling through any HUD-approved agency. ULDD Sort ID 576 must be set to “HUD Approved Counseling Agency,” and ULDD Sort ID 578 must be set to “HomeStudy” if the

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 8 of 9

borrower completed the Framework online course, or set to “Individual” if the borrower completed counseling through a HUD-approved agency.

Homeownership Education (Note: Refer to the separate homeownership education FAQs for more details.)

Q34. What are the homeownership education requirements for HomeReady loans?

At least one borrower on each HomeReady purchase transaction must complete the Framework® online education program (see exceptions below).

Exceptions:

▪ For HomeReady loans that involve a Community Seconds® or down payment assistance program, buyers may instead complete the homeownership education course or counseling required by the Community Seconds® or down payment assistance program as long as it is provided by a HUD-approved agency and completed prior to closing.

▪ The presence of a disability, lack of Internet access, and other issues may indicate that a consumer is better served through other education modes (for example, in-person classroom education or via a telephone conference call). In such cases, lenders should direct buyers to Framework’s toll-free customer service line (855-659-2267), which can refer consumers to a HUD-approved counseling agency.

▪ Finally, buyers who have already completed housing counseling prior to entering into a sales contract (as evidenced by a completed Fannie Mae Form 1017) are not required to complete the Framework course.

Fannie Mae believes that access to high-quality education and counseling can provide the borrower with the additional information and resources to make informed decisions that support long-term homeownership sustainability. For more information, refer to the homeownership education FAQs.

Q35. May the lender rebate the $75 homeownership education cost for the Framework course to the borrower?

Lenders may choose to provide a credit against closing costs in accordance with our existing Selling Guide policies. See “Lender Incentives for Borrowers” in Selling Guide section B3-4.1-02, Interested Party Contributions (Lender Incentives for Borrowers).

Framework offers lenders, real estate agents, or other parties the option of purchasing one or multiple coupon codes to provide to customers who plan to take the Framework course. Coupons can cover the entire $75 course fee or just a portion of the course cost. To purchase coupons, visit Framework's coupon store at http://store.frameworkhomeownership.org.

Q36. Do lenders need to have the Borrower’s Authorization for Counseling form signed at closing for HomeReady loans?

No. The requirement to have the Borrower’s Authorization for Counseling form signed at closing was removed from the Selling Guide in December 2015 (SEL-2015-13).

All eligibility criteria and requirements are subject to the formal terms and conditions of the Fannie Mae Selling Guide. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 9 of 9

Servicing

Q37. Are there any specific servicing requirements for HomeReady?

No. In June 2016, Fannie Mae updated our servicing policies to eliminate requirements unique to community lending mortgage loans (see Servicing Guide Announcement SVC-2016-05). HomeReady mortgage loans must be serviced in accordance with policies for all other Fannie Mae non-government conventional mortgage loans. These include the servicer’s requirement to provide information on and, when appropriate refer borrowers to, programs that may assist in resolving their delinquencies or housing counseling agencies that may help them in their debt management.

Q38. Can a servicer refer a borrower to the Framework network housing counselor if the borrower requests housing

counseling?

Yes. Fannie Mae requires that housing counseling be provided by a HUD-approved counseling agency, and the Framework network of housing counselors meets that standard. HomeReady borrowers should be reminded of the housing counseling resources available to them, including the Framework network, throughout the life of their mortgage loan. For more information on Framework, the servicer should refer to the homeownership education FAQs.

NOTE: The DU allowance of a maximum DTI of up to 50 percent and the $500 LLPA credit applies only when a buyer completes counseling prior to entering into a sales contract.

Lender Resources

Q39. What resources and training are available for lenders?

Many lender resources are available on the HomeReady web page, including the following:

▪ Product matrix, loan officer fact sheet, general FAQs, and Homeownership Education and Housing Counseling FAQs

▪ HomeReady Income Eligibility Lookup tool, which provides lenders and other housing professionals with a quick and easy way to determine potential eligibility for HomeReady by property address or by Federal Information Processing Standards (FIPS) code

▪ HomeReady income flexibility fact sheets, including sample borrower scenarios

▪ An eLearning overview course and eLearning training for loan officers, available 24/7

▪ Customizable marketing materials, in English and Spanish, to help you promote HomeReady to your customers and business partners

This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern. © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 1 of 5

HomeReady Mortgage Product Matrix Designed for creditworthy low-income borrowers, HomeReady® lets you lend with confidence while expanding access to credit and supporting sustainable homeownership. Key features include:

▪ Affordable, conventional financing with cancellable mortgage insurance (restrictions apply)

▪ Up to 97% loan-to-value (LTV) financing and flexible sources of funds

▪ Innovative underwriting flexibilities that expand access to credit responsibly

1-Unit 2- to 4-Units

Elig

ibili

ty

Loan Purpose Purchase or Limited Cash-out Refinance (LCOR)

Occupancy and Property Type 1-unit principal residence, including eligible condos, co-ops, PUDs, and manufactured housing

2- to 4-unit principal residence (no condos, co-ops, or manufactured housing)

Manufactured Housing In accordance with standard MH guidelines (Desktop Underwriter® [DU®] required; max 95% LTV/CLTV; FRMs or 7/1 and 10/1 ARMs only; no buydowns)

Not applicable

HomeStyle® Renovation In accordance with standard HomeStyle Renovation guidelines

(special lender approval; max LTVs/CLTVs per HomeStyle Renovation guidelines)

Borrower Income Limits 80% of area median income (AMI)

Minimum Borrower Contribution (own funds)

$0 $0 for LTV/CLTV/HCLTV of 80% or less; 3% for LTV /CLTV/HCLTV > 80%

3% required if sweat equity is being used

Acceptable Sources of Funds for Down Payment and Closing Costs

Gifts, grants, and Community Seconds®. Cash-on-hand for 1-unit properties only. Any eligible loan may have more than one Community Seconds (i.e., third lien) up to the maximum 105% CLTV

(see Community Seconds fact sheet). Sweat equity is acceptable in accordance with the Selling Guide.

Product 10-, 15-, 20-, or 30-year fixed-rate mortgages (FRMs)

5/1 (2/2/5 and 2/2/6 caps only), 7/1, and 10/1 adjustable-rate mortgages (ARMs)

This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 2 of 5

1-Unit 2- to 4-Units

Elig

ibili

ty (c

ontin

ued)

Maximum LTV/CLTV and Subordinate Financing

CLTV up to 105% with eligible Community Seconds (Refer to Eligibility Matrix for details)

Other subordinate financing per the Selling Guide

Maximum LTV/CLTV and Subordinate Financing

Purchase: • DU Only – LTV > 95% to 97% (FRM)

• DU and manual underwriting to 95% (FRM and ARM)

LCOR: • DU Only – LTV > 95% to 97% (FRM) for loans owned or

securitized by Fannie Mae. DU and manual underwriting to 95% (FRM and ARM)

Purchase or LCOR:

2-unit: 85% (FRM or ARM)

3- to 4-unit: 75% (FRM or ARM)

Multiple Financed Properties Occupant borrower(s) may own one other financed residential property (in addition to the subject property) at the time of closing. Non-occupant borrower(s) are not subject to this restriction.

Non-Occupant Borrowers Non-occupant borrowers permitted to maximum 95% LTV in DU;

90% LTV manual with max 43% debt-to-income (DTI) for occupying borrower. Income considered as part of qualifying income and subject to income limits.

Interest Rate Buydowns 3-2-1 and 2-1 buydown structures permitted; buydowns on 3- to 4-unit properties available in DU

Mortgage Insurance (MI) Coverage and Financed MI

• 25% MI coverage for LTVs 90.01−97%

• Standard MI coverage for LTVs of 90% or less

• MI may be financed up to the maximum LTV for the transaction, including the financed MI

(Minimum MI Coverage Option may be used with additional LLPA; the HomeReady LLPA waiver or cap does not apply).

Desktop Underwriter® (DU®)

• Based on the census tract and borrower income, DU will notify users when a loan casefile appears to be eligible for HomeReady but the lender has not underwritten the loan casefile as HomeReady. Resubmit the loan casefile as a HomeReady loan to obtain the appropriate HomeReady messaging. The Additional Data screen field will allow the lender to enter census tract information if DU is unable to geocode the property address.

• DU recommendation of Approve/Eligible required. DU will determine qualifying ratios and reserves.

This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 3 of 5

1-Unit 2- to 4-Units

Und

erw

ritin

g

Manual Underwriting (Limited waiver of representations and warranties does not apply. LTVs >95% not eligible for manual underwriting.)

Use manual underwriting if the DU recommendation is other than Approve/Eligible. Benchmark qualifying ratio follows Fannie Mae standard Selling Guide (Section B3-6-02) for manual underwriting.

Manual underwriting Reserve Requirements

Minimum none or up to 6 months, per the Eligibility Matrix (based on credit score, DTI ratio, and FRM or ARM)

6 months minimum reserves

Manual Underwriting Representative minimum credit scores

620 - Minimum could be higher for certain reserves and debt-to-income ratios; see the Eligibility Matrix

Manual Underwriting Exceptions to Minimum Credit Score Requirements: Borrowers with Low Credit Scores.

• Borrowers with nontraditional credit are eligible. In addition, up to 30% of qualifying income may come from a borrower for whom no traditional or nontraditional credit profile can be established.

• If the borrower has a credit score below the minimum required as a result of an insufficient traditional credit history (“thin files”) as documented by reason codes on the credit report, the lender may supplement the thin file with an acceptable nontraditional credit profile. SFC 818 must be used to identify loans with supplemented thin files (for manually underwritten loans only).

• If a borrower has a credit score below the minimum required, but not as a result of a thin file, the lender may not establish a nontraditional credit profile to supplement the borrower’s traditional credit history.

• If the borrower’s credit history was heavily influenced by credit deficiencies that were the result of documented extenuating circumstances, the minimum credit score requirement must be met (per the Eligibility Matrix), or the credit score must be no less than 620.

Not Eligible

Other Income

Boarder income (relatives or non-relatives): Up to 30% of qualifying income; documentation for at least 9 of the most recent 12 months (averaged over 12 months) and documentation of shared residency for the past 12 months.

Not eligible

This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 4 of 5

1-Unit 2- to 4-Units

Accessory dwelling units: Rental income may be considered in qualifying the borrower per rental income guidelines.

Rental income may be used as qualifying income per rental income guidelines.

Hom

eow

ners

hip

Educ

atio

n an

d H

ousi

ng C

ouns

elin

g

Homeownership Education • At least one borrower on each HomeReady purchase mortgage must do one of the following:

o complete the Framework homeownership education course prior to closing; or

o complete a homeownership education course required by a Community Seconds or Down Payment Assistance Program that is provided by a HUD-approved agency prior to closing, if the HomeReady loan involves a Community Seconds or down payment assistance program; or

o receive housing counseling from a HUD-approved nonprofit housing counseling agency (as evidenced by a signed Certificate of Completion of Housing Counseling (Form 1017)) prior to the borrower signing a purchase contract; or

o have already completed housing counseling (as evidenced by a completed Fannie Mae Form 1017).

• Lenders may choose to provide a credit against closing costs for the $75 Framework fee in accordance with Selling Guide B3-4.1-02 (Lender Incentives for Borrowers).

NOTE: Homeownership education certificate or Form 1017 must be retained in the mortgage file.

Housing Counseling Benefits When borrowers have received customized assistance prior to entering into a sales contract from HUD-approved nonprofit counseling agencies (as evidenced by a completed Form 1017 in the loan file), the lender will receive a loan-level price adjustment credit of $500, when the HomeReady loan is delivered with Special Feature Code 184.

Post-Purchase Support To support sustainability, borrowers who complete the Framework course will have access to post-purchase homeownership support through Framework's homeownership advisor service.

Special Borrower Considerations for Online Homeownership Education

Framework’s online education may not be appropriate for all potential home buyers. The presence of a disability, lack of Internet access, and other issues may indicate that a consumer is better served through other education modes (e.g., in-person classroom education, telephone conference call, etc.). In these situations, consumers should be directed to Framework’s toll-free customer service line, from which they can be directed to a HUD-approved counseling agency that can meet their needs. The counseling agency that handles the referral must provide a certificate of completion, and the lender must retain a copy of the certificate in the loan file.

This summary is intended for reference only. All criteria are subject to the formal terms and conditions of the Fannie Mae Selling Guide and Servicing Guide. In the event of any conflict with this document, the Selling Guide and/or Servicing Guide will govern © 2019 Fannie Mae. Trademarks of Fannie Mae. July 2019 5 of 5

1-Unit 2- to 4-Units

Pric

ing

and

Com

mitt

ing

Loan-Level Price Adjustments (LLPAs) Standard risk-based LLPAs waived with an LTV above 80% and a representative credit score equal to or greater than 680; for loans outside of these parameters, standard LLPAs apply (per the LLPA matrix) with a cap of 1.50%.

(The Minimum MI Coverage Option LLPA is not waived or considered toward the cap if that option is used.)

Whole Loan Pricing/Committing View live whole loan pricing and make commitments in Fannie Mae’s whole loan committing application

MBS Pricing and Committing Lender base guaranty fee per MBS contract

Execution Commingle with non−HomeReady loans in whole loan commitments and MBS pools

Delivery Data Special Feature Code 900 required; set ULDD Sort ID 238 – LoanAffordableIndicator – to “True,” for any mortgage where the borrower completes homeownership education through Framework or housing counseling through a HUD-approved agency, and set ULDD Sort ID 576 to “HUD Approved Counseling Agency.” If the borrower completed the Framework online course, set ULDD Sort ID 578 to “HomeStudy”; if the borrower completed counseling through a HUD-approved agency, set ULDD Sort ID

578 to “Individual.”

Special Feature Code 184 is required at delivery for lenders to receive $500 LLPA credit when borrowers have received one-on-one counseling from a HUD-approved counseling agency prior to a sales contract as evidenced by a completed Form 1017 in

the loan file.

Servicing HomeReady loans are serviced under the requirements for all other Fannie Mae non-government conventional mortgage loans. In June 2016, Fannie Mae updated its servicing policies to eliminate requirements unique to community lending mortgage

loans.

Find more resources at fanniemae.com/homeready.