How the AMI Program Helps First-Time Homebuyers Save Money

Finding an affordable path to homeownership can feel like an uphill battle in today’s market. But what if there was a “hidden” mortgage program that most lenders don’t even mention?

I’m talking about the Area Median Income (AMI) program. It’s one of the coolest topics in real estate because it applies to every corner of the United States, yet very few people – even some professionals – know it exists. If you’re a first-time homebuyer looking for a way to make your monthly payment more manageable, this program might be precisely what you need.

What is the Area Median Income (AMI) Program?

The AMI program is a specialized mortgage initiative designed to help moderate-income families purchase a home. Many people confuse this with programs such as Fannie Mae’s HomeReady or Freddie Mac’s Home Possible; the AMI program is a distinct model.

While other programs typically cap income at 80% of the area median, the general AMI program allows higher limits, making it accessible to a much broader range of buyers.

The Core Guidelines: What You Need to Know

To qualify for the benefits of this program, there are a few specific ground rules to keep in mind:

Loan Type: This is exclusively for Fannie Mae and Freddie Mac loans.
30-Year Fixed Only: You won’t be able to use this for 15-year terms or Adjustable-Rate Mortgages (ARMs). It is for long-term stability.
Primary Residences: You must plan to live in the home yourself.
High Loan-to-Value (LTV): This program allows you to go up to 97% LTV, meaning you only need a 3% down payment. (Note: In some high-cost areas, this is limited to 95%, so always check with your lender.)
Property Variety: Whether you’re looking at a single-family home, a condo, a co-op, a townhome, or even a manufactured home on a foundation, you’re likely covered.

Who Qualifies as a “First-Time Homebuyer”?

The definition of a first-time buyer is more flexible than you might think. Under the AMI program, you qualify if:

You have had no ownership interest in a property during the previous three years. (If you owned a home 10 years ago but have been renting for the last four, you are officially a first-time homebuyer again!)
You are a displaced homemaker or single parent who has had joint ownership with a former spouse in the last three years.

How the Income Limits Work (and a Pro Tip for Qualifying)

In most parts of the country, you can qualify for this program if your income is at or below 100% of the Area Median Income. In designated “high-cost” areas (such as the San Francisco Bay Area), the limit increases to 120%.

The “Base Income” Strategy

Here is the part most lenders won’t tell you: when we calculate your eligibility, we can use only your base income.

If your total income (including overtime, bonuses, or commissions) exceeds the AMI limit, we can often exclude those extras to help you stay below the threshold and qualify for the program’s benefits. This is a game-changer for people who work hard and want to keep their interest rates low.

The Major Benefit: Lower Interest Rates

Why go through the effort of qualifying for the AMI program? The answer is simple: Money.

Borrowers who qualify for the AMI program typically receive interest rates 0.25% to 0.50% lower than standard market rates. Over the life of a 30-year mortgage, that quarter or half-percent translates into thousands of dollars in savings.

Next Steps

If you’re a first-time homebuyer, the AMI program should be at the very top of your checklist. It offers lower rates, flexible income calculations, and even allows for non-occupant co-borrowers to help you qualify.

Ready to see if you fit the AMI criteria? I personally run this check for every first-time buyer I work with to ensure they aren’t leaving money on the table. Feel free to reach out or use the calendar link below to discuss your journey to wealth-building through homeownership!