I've recently posted this on my blog, www.themortgageblogger.net
, but thought people in this forum would appreciate the information. If you have questions about this feel free to drop me a line!
With the number of REO properties increasing, I’m being asked more often about HomePath financing. HomePath financing is available for Fannie Mae REO’s with the HomePath logo found on HomePath.com. There are approximately 300 properties in Sacramento today that are eligible for this financing. I’ve personally noticed a significant increase in questions about this financing so I thought I would cover the basics. First, there are two types: a HomePath Mortgage and a HomePath Renovation Mortgage. The difference being, the HomePath Renovation Mortgage will allow minor fixes to the property.
Here is a quick synopsis of the HomePath Mortgage:
- Minimum 3% down for primary residence, 10% down investment property
- Borrower can own up to 10 financed properties (but need 25% down if they own more than 4)
- NO APPRAISAL NEEDED
- NO MORTGAGE INSURANCE
- High balance (jumbo) and interest only products available
- Seller contributions can be 6-9% on primary residence (the larger the down payment, the larger the allowable contribution), only 2% on investment property
- This loan does price with a higher rate than your average 30 year fixed conforming loan. If you want an equivalent rate to the going 30 year fixed, this loan would price with an additional approx 1% to 3.75% discount points. Keep in mind, much of this can be covered by the seller and there is no mortgage insurance. Of course one can just opt for the higher rate in lieu of the discount points.
- Same basic underwriting requirements of a conforming loan, but without the property issues (appliances missing - no problem)
The HomePath Renovation Mortgage is currently only offered by 3 lenders nationwide. This will allow for light renovations to the property that can be included into the loan. Information about this specific product is scarce. In general, renovation and construction type of products work like this:
- An appraisal is done “subject to” the completion of the repairs. The value will typically be the appraised value or the cost of the house plus renovations, whichever is lower. The down payment is based on this value (hence, most of the renovation work gets financed into the loan).
- The loan closes and the repairs are completed by a licensed contractor within a specified amount of time
- There is more involved with these types of loans, such as: bids, inspections, draw schedules, etc.
- The interest rate is typically higher than your general conforming 30 year fixed
Overall, the HomePath Mortgage is a great loan. I can’t attest to the HomePath Renovation Mortgage but I’m sure it’s great loan as well. If you are “handy” and can do most of the work yourself, you may consider the HomePath Mortgage. When a lender is going to finance renovation work, they will require the work to be completed by a licensed contractor so this sometimes may not work for the “do-it-yourselfer”.