HomePath mortgage financing is only available on properties owned by Fannie Mae. The HomePath program offers several benefits, including a 5% down payment and no mortgage insurance for move-in ready homes for investors or owner occupants. Buyers may purchase a Fannie Mae-owned home with no lender-requested appraisal and flexible terms. Expanded seller contributions to closing costs are allowed.
Unlike a traditional mortgage, the HomePath Renovation mortgage offers the money to purchase and renovate the home in a single loan.
The HomePath program was created to help Fannie Mae clear a large inventory of properties that were taken through foreclosure. While qualifying for a HomePath mortgage, this also comes with more stringent requirements than other government-backed mortgages. The advantages may be worth it for many.
Many buyers are frustrated when they try to buy a foreclosure; many buyers will become frustrated if their lender will not allow the loan. This is often caused by properties that require repairs; that will not pass a property inspection. For such buyers , the HomePath program offers a clear benefit.
Fannie Mae does not actually lend to buyers but instead sets guidelines that lenders must follow if they want Fannie Mae to purchase the loans they originate. With the HomePath program, Fannie allows lenders to finance properties owned by the agency with as little as 5% down for buyers who will live in the home and 10% down for investors.
The HomePath program also offers renovation loans for buyers who want to buy a home that needs repairs. The financing may be for up to 97% of what the home will be worth after repairs.
Advantages of HomePath Mortgage Loans
- Buyers do not have to compete with investors during the first 20 days the property is listed (30 days in Nevada). Agents are barred from accepting offers from investors during this initial time period.
- 5% down payment may be funded by personal savings, a gift, a loan or an employer.
- The property does not have to be appraised unless the buyer wants to borrow money for renovations.
- An inspection is not required.
- Mortgage insurance is not required, regardless of the down payment.
- Buyers with less-than-perfect credit may qualify.
- Fixed-rate, Adjustable-rate and interest-only terms available.
- Some HomePath properties receive repairs or improvements before they are listed for sale, either by The Home Depot with a 1-year limited warranty or by a Fannie Mae-approved contractor.
Downside of HomePath Mortgage Loans
The biggest drawback of the Homepath mortgage program is interest rates tend to be slightly higher. In general, HomePath mortgage rates are around a quarter to a half of a percentage point higher than conventional mortgage rates. For many buyers, this cost is offset, because the loan does not require mortgage insurance.
As an example, a buyer who purchases a $200,000 home with 5% down will pay around $150 per month on mortgage insurance using a conventional mortgage.
Buyers may also choose to reduce the interest rate by paying points, which is added to upfront costs. HomePath remains one of the best options for home buyers who wish to purchase and fix up a foreclosure property.