HomeReady PMI Overview
HomeReady loans are conventional mortgages, so they require private mortgage insurance (PMI) on purchases with less than 20% down payment and for refinances over 80% loan-to-value.
However, because HomeReady is an affordable mortgage program, its PMI rates are lower as compared to standard conventional loans. Also, HomeReady PMI is cancelable when the home reaches 80% LTV.
📊 Key Statistic
HomeReady PMI Savings by LTV
HomeReady is designed as an affordable mortgage program, and one way Fannie Mae lowers costs is by reducing the program's private mortgage insurance (PMI) coverage requirement.
Lower coverage means lower PMI premiums, which makes HomeReady less expensive than a comparable standard conventional loan.
HomeReady PMI premiums are based on:
- Loan-to-value ratio (LTV)
- Credit score
- Loan type and term
- Coverage level
Here’s how PMI rates compare at a 620 credit score for a 30-year fixed purchase of a 1-unit home in Ohio:
| LTV | Standard PMI | HomeReady PMI | Annual Savings |
|---|---|---|---|
| 97% | 1.95% | 1.45% | 0.50% |
| 95% | 1.30% | 1.15% | 0.15% |
| 90% | 0.90% | 0.90% | 0.00% |
| 85% | 0.41% | 0.41% | 0.00% |
Savings are most significant at higher LTVs, where HomeReady’s reduced coverage requirements have the biggest impact.
HomeReady PMI Savings by Credit Score
At any given down payment amount, a HomeReady loan's PMI costs vary based on credit score. Borrowers with higher scores pay lower premiums. However, as compared to conventional loans, HomeReady homeowners almost always pay less.
Here is a table that shows the difference in PMI costs for a HomeReady mortgage and a comparable 30-year fixed-rate conventional mortgage.
| Credit Score | Standard PMI | HomeReady PMI | Annual Savings |
|---|---|---|---|
| 760+ | 0.55% | 0.44% | 0.11% |
| 740-759 | 0.69% | 0.52% | 0.17% |
| 720-739 | 0.76% | 0.59% | 0.17% |
| 700-719 | 0.90% | 0.68% | 0.22% |
| 680-699 | 1.20% | 0.91% | 0.29% |
| 660-679 | 1.65% | 1.20% | 0.45% |
| 640-659 | 1.80% | 1.27% | 0.53% |
| 620-639 | 1.95% | 1.45% | 0.50% |
For more on how credit scores affect HomeReady PMI, see our HomeReady Credit Score Guide.
When Can You Remove PMI on a HomeReady Loan?
Like other conventional mortgages, HomeReady PMI is cancelable:
| PMI Checkpoint | Type | How It Works |
|---|---|---|
| 80% LTV | By request | Request PMI removal when balance is 80% of current value. |
| 78% LTV | Automatic | PMI drops off at 78% of original value if payments are current. |
| Loan Term Midpoint | Automatic | PMI ends halfway through loan if payments are current. |
FHA loans, by contrast, often require mortgage insurance for the life of the loan.
Not sure if you qualify for HomeReady? Check the HomeReady Income Limits Guide to see if your income is within the 80% AMI cap, and review the Loan Requirements Guide for the full eligibility checklist.
Key Takeaway
HomeReady requires PMI with less than 20% down payment, but at lower rates than for comparable conventional mortgage types at most credit score and LTV combinations.
Like all conventional loans, HomeReady PMI can be removed once the homeowner reaches 20% equity in their home, making a path to lower monthly mortgage payments over time.
Frequently Asked Questions About HomeReady PMI
Find answers to common questions about PMI for the HomeReady mortgage program.
Does HomeReady require PMI?
Yes. All HomeReady loans with less than 20% down require private mortgage insurance.
Is HomeReady PMI cheaper than standard conventional?
Yes. PMI coverage is reduced, resulting in lower monthly premiums compared to a similar standard conventional loan.
Can I cancel HomeReady PMI?
Yes. PMI can be canceled once your loan reaches 80% loan-to-value (LTV) or automatically drops off at 78% LTV.
Does credit score affect PMI costs?
Yes. Higher credit scores usually mean lower PMI premiums, even under HomeReady.
Is PMI tax-deductible?
PMI may be tax-deductible depending on current federal tax law. Check with a tax professional.
