The Fannie Mae HomePath Mortgage Program.
Many homebuyers are currently trying to take advantage of the numerous bank owned (REO) properties that are currently for sale. Although there are many financing options available, some are better and tailored specifically to meet the needs of these REO's. One such loan program is known as the Fannie Mae HomePath® Mortgage.
Fannie Mae created a custom loan program specifically for Fannie Mae HomePath® Properties. This financing is only available for foreclosed properties owned by Fannie Mae that have been designated as HomePath® properties. The complete list can be found at www.HomePath.com. Fannie Mae lists these properties with local REO agents that typically have experience in selling foreclosed homes.
There are numerous benefits to using HomePath® Mortgage financing over your traditional loan programs when purchasing a HomePath® Mortgage. The benefits of the program are blogged all over this website so I won't get into the specifics, but it's important to note that an average HomePath® loan should fund in about 21 days (assuming the borrower is providing the conditions in a timely manner), try getting that done with an FHA loan! What I want to talk about is improper qualifying for HomePath® listed Properties.
I wanted to clarify the confusion I am seeing surrounding HomePath® financing versus FHA. I have seen time and time again FHA offers being put in on HomePath® listings and typically at the recommendation of banks or the mortgage loan officers. The dirty little secret is the bank or loan officer typically benefits more than the buyer or they are simply unable to offer HomePath® financing.
Let's run the numbers.
John Homebuyer is purchasing a HomePath® property for $200,000 and wanting to put 5% down.
Rate 4.625% (average premium being paid to the originator at this rate is 2.00%)
30 Year Amortization
FHA Upfront MIP 2.25% (yes, FHA requires upfront mortgage insurance)
Annual Premium .50% or $79.19 per month added to your monthly P&I payment
Total payment with FHA loan & Monthly MIP payment $1,056.06
Rate 5.00% (Par to Broker)
30 Year Amortization
No Annual Premium
Total payment with HomePath® financing $1019.96
Now let's talk collateral. It is a well known fact that foreclosed properties are rarely well maintained and often times are in need of a little TLC, or at least some fixtures or appliances. Fannie Mae HomePath® Mortgage DOES NOT REQUIRE AN APPRAISAL!! FHA has strict guidelines on the condition of the property and also additional underwriting guidelines that HomePath® Mortgage does not. FHA loans will require an appraisal to be done which is an additional cost to the borrower (an average of $425).
Real Estate Agents, when working with you clients, make sure their loan is the best loan for the property they are purchasing! A HomePath® listing should always be financed with a HomePath® Mortgage. Ask the broker or bank why the borrower is being qualified for an FHA loan and not HomePath.