HomePath Mortgage vs FHA Loan- Which is best for you?

By
Mortgage and Lending with www.DaveYourMortgageGuy.com, FHA, VA, USDA, HomePath, Jumbo NMLS #293883
http://actvra.in/qDp

 

Often I am asked which is a better loan for a homebuyer, A HomePath Mortgage or a FHA Loan?  It is actually not a clean cut answer for everyone.  So I wanted to take the time to go over the benefits of each.  And what you need to think about when making a decision between a HomePath or FHA mortgage.  Keep in mind this is only in regards to buying a Fannie Mae Foreclosure. 

HomePath Mortgage

The HomePath Mortgage Program is a GREAT program if you are looking to only purchase a  Fannie Mae foreclosure.  The benefits are:

  • No mortgage insurance- this allows you to buy more home and/or have a lower mortgage payment.  To offset the lack of mortgage insurance the interest rate will be much higher than FHA loans
  • No Appraisal- this saves the buyer the cost of an appraisal($400+).  More importantly it allows the buyer to buy a home that may need some minor work/repairs.  Fannie Mae wants to sell these homes and by not requiring an appraisal it allows the home to get financed without having to fix any issues
  • Down Payment is as little 3%
  • Seller contribution is allowed to go up to 6%, or 9% with a 25% down payment
  • Real Estate Investors qualify for just a 15% DOWN PAYMENT, this is great since investment property loans now require a 20-25% down payment. 

Please keep in mind you must qualify for a conventional loan to qualify for a HomePath mortgage and have a minimum fico of 660 for the lower down payment options and min 620 score for 20%+ down payment.  Most MLS listings mention if the home qualifies for the HomePath program, but if you would like to check to see if a property qualifies you can go to www.homepath.com

FHA Loan

The mortgage rate on a FHA loans are generally lower than market rates, while down payment requirements are lower than for conventional loans.

Some of the other benefits of FHA financing:

  • Only a 3.5% down payment is required.
  • Closing costs can be paid by the seller. Up to 6%
  • More flexible underwriting criteria than HomePath loans, such as allowing lower credit scores,  allows high debt to income ratios, etc

Conclusion

Only compare these two options if you plan on buying a Fannie Mae Foreclosure.  The HomePath loan is great if the home needs repairs or work, since there is no appraisal needed.  And without an appraisal the lender will not know or be concerned with the condition of the home. While a FHA loan would obviously require some repairs to be done, if they are major, etc.  And now let’s compare them directly to each other.  If you are buying a home of $250k and are putting a down payment of 5%, a HomePath Mortgage would give you a lower payment by $70.  This example is using an interest rate of 3.75%(30 year) on a FHA loan and 4.875%(30 year) on a HomePath loan. 

Everyone’s needs and financial goals are different, so before making a decision for yourself contact a knowledgeable mortgage professional.   And ask that Lender for mortgage estimates for both loans.  And if you live in Texas, contact Dave Your Mortgage Guy.  This is just another great example of it being in your best interest to know all your mortgage options!!

close

Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Maggie McFarland 01/04/2012 08:56 AM
  2. Joyce Godwin 01/06/2012 10:31 PM
  3. Gene Riemenschneider 01/07/2012 01:00 PM
  4. Joyce Kelley 03/23/2013 06:01 AM
Topic:
ActiveRain Community
Location:
Texas Fort Bend County Sugar Land
Groups:
Texas Rocks!
The FHA Mortgage Group
Texas Gulf Coast
Mortgages
Realtors Needing the services of the Lending Powers
Tags:
texas
fha
houston
down payment
appraisal
best
katy
county
sugar land
the woodlands
mortgage
no mortgage insurance
homepath

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Rainmaker
500,890
Maggie McFarland
RE/MAX Pearland - Maggie McFarland - Pearland, TX
Pearland Realtor, Homes for Sale in Pearland Texas

Hi Dave!

Great blog! I love the way you explain both options! Definely worth the reblog! Have a great day!

Jan 04, 2012 08:53 AM #1
Rainmaker
590,692
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Nice explanation of the differences. Don't see many of the HomePath Mortgage options here. We do get a lot of the Freddie Macs, though.

Jan 04, 2012 09:34 AM #2
Rainmaker
360,618
David Krichmar
www.DaveYourMortgageGuy.com, FHA, VA, USDA, HomePath, Jumbo - Sugar Land, TX
DaveYourMortgageguy.com

Thank You Maggie!

Thanks Than

Jan 04, 2012 09:55 AM #3
Rainmaker
241,606
Joyce Godwin
12810 Telge,Cypress,TX 77429 -Houston,Cypress,Spring,Tomball - Cypress, TX
RE/MAX Realty Center, Houston Area Relocation Info

Hi David, I've had that question asked before - probably not nearly so often as you though!  I will have to reblog it too.  Thanks for the simplified, easy-to-understand explanation!

Jan 06, 2012 10:28 PM #4
Rainmaker
360,618
David Krichmar
www.DaveYourMortgageGuy.com, FHA, VA, USDA, HomePath, Jumbo - Sugar Land, TX
DaveYourMortgageguy.com

Thank you Joyce

Jan 08, 2012 12:46 PM #5
Anonymous
dave

Wouldn't the mortgage insurance be preferable to a higher rate, since you have the ability after reaching 80% ltv to have the mortgage insurance removed (after 5 years on fha) wheras the homepath you're stuck with the higher rate, even after hitting 80%?

 

 

Feb 01, 2012 06:30 PM #6
Rainmaker
360,618
David Krichmar
www.DaveYourMortgageGuy.com, FHA, VA, USDA, HomePath, Jumbo - Sugar Land, TX
DaveYourMortgageguy.com

Dave, I would agree with you on that.  But in this market it could take much longer for the mtg balance to reach 80% or less of the homes value, than just 5yrs.  In the end it really depends on the clients financial goals long term and short term. 

Feb 02, 2012 02:43 PM #7
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Rainmaker
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David Krichmar

DaveYourMortgageguy.com
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