Tucson Arizona (AZ) Real Estate and Homes For Sale- HomePath Financing Probably The Best Loan Option For People With Less Then 20% Down AS It Has No Mortgage Insurance! Here’s How It Works.
February 13th, 2009 by Michael Oliver
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Share on Facebook Looking to buy a bank owned home/ foreclosure? Well here is the lowdown on some special financing available on certain Fannie Mae owned homes, this new loan is called “Fannie Mae HomePath financing”. With a Fannie Mae HomePath loan Fannie Mae allows for buyers to buy with zero down (though a community mortgage 2nd) or as little as 3% down! That’s less then an FHA loan. (FHA loans carry a minimum 3.5% down payment) That’s not even the important part for you as a buyer; the important part is the FACT that Fannie Mae (who’s giving out the loan on one of their own foreclosed properties) doesn’t require an appraisal OR NO MORTGAGE INSURANCE SAVING YOU AS A BUYER A LOT OF MONEY! The appraisal issue to me as a Realtor who specializes in buyers doesn’t to me make it feel like that portion alone is “ground breaking”. However the fact that Fannie Mae is charging ZERO for mortgage insurance and not requiring it is downright impossible to believe here’s how mortgage insurance (for short called MI) works:
SEARCH ALL TUCSON HOMEPATH APPROVED HOMES FOR SALE HERE!
Any buyer with less then 20% down for a home is required to also buy insurance for the lender in case they default the lender is reimbursed for the potential losses on the mortgage. This insurance premium runs thousands of dollars easily. Depending upon the buyer’s credit rating and other financials mortgage insurance can even on well qualified buyers run $200-$250/ month in today’s risky real estate markets. (Risky from the mortgage insurance providers side of the fence because they are on the line for having to pay out and cover the lenders losses if/when their policy holders’ default.) So what this means to you as a foreclosure home buyer is on certain Fannie Mae properties you will be able to save a lot of money by using this loan product vs. any other loan in the market. Every single other loan that I have ever heard of has mortgage insurance required for any borrower (buyer) that’s not placing 20% down on their home purchase. This one doesn’t and that’s really a big thing for buyers because instead of paying hundreds a month for an “insurance policy covering your lender” you can save the money. OR you can buy a little bigger home for the same monthly payment you would have been at before using a loan that required mortgage insurance. The HomePath loan program is somewhat new and very few Realtors or lenders even know how it works or what’s involved. Today I asked 7 loan officers if they knew about the program and only 2 could give me any sort of guidance of how the loan program works that’s how specialized and new it is.
Now keep in mind this program is only on very select properties you can’t just use this across the board. Right now in Tucson only 160 properties are able to have a HomePath financed loan used for the purchase of that home. These homes are essentially owed and being sold by Fannie Mae this is why they allow HomePath financing on these select properties and no others. Also thes homes are in all areas and price ranges and many of the homes that qualify for this financing are very nice, newer homes that buyers can move into without the normal issues of major repairs a lot of foreclosure homes carry with them. This is something buyers looking to buy a distress home should be very conscious of because not using this loan on a home that qualifies for the loan program will cost you as a borrower literally thousands of dollars for no real reason other then you, (and your Realtor) didn’t know it existed. If you would like additional information on which properties qualify for this special loan program send me an email (or call) and I can assist you to find quality foreclosure/ bank owned homes you will be able to use HomePath financing when purchasing. Hopefully this post will spread the word and educate those un-aware that this is a way to shave significant mortgage costs in a meaningful way.
- 17 Comments »
- Posted in Buying, Financing, First Time Buyers, Foreclosure/REO
1650 E. River Road, Suite 202
Mike,
HomePath is a wonderful financing tool from Fannie Mae. I see two HUGE benefits from HomePath. NO APPRAISAL. In our market, not having to get an appraisal is amazing. Not only does it save the buyer $350, there is NO STRESS when it comes to the value of the home. There is NO Question of the Value of the home by the lender. Very nice advantage for all parties involved in these transactions.
No Mortgage Insurance is the MOST BEAUTIFUL part of this. In Arizona Mortgage Insurance Companies have cut back on so many programs and increased the requirements to be approved for loans with Mortgage Insurance. In many cased Lenders will approve a home loan but when it requires mortgage insurance the lender has to have the loan re underwritten be the mortgage insurance company. One thing I have learned in the last 13 years in the mortgage business your don’t want more than one underwriter looking at a loan. Having a home loan unwritten by two underwriters is never a good idea.
I am doing one of these loans right now and it very nice not having to worry about the appraisal or mortgage insurance. These HomePath loans are more affordable to buyers and less stress. Win Win for everyone.
Mike,
If Homepath doens’t require appraisal how does the lender calculate the property value to buy the insurance.
Luis
The lender is the one that owns the home so they just want to start recieving interest on the money they lent out is essentially how it works in their minds. That’s why they are so willing and able to give such good financing incentives on the REO homes they have for sale.
Would the first time buyer still be eligbile for the $8000 tax credit?
@ Denise- Yes any first time buyer who closes on a home by 11/30/09 is eligable for the $8000 Federal Tax credit.
Let me get this straight… Homepath Financing is not an FHA backed mortgage?
I have made an offer thru bidselect, Fannie May REO. It states “HomePath Mortgage Financing” eligable. I did not know this, nor did my agent, in the initial offer 20% down was stated, if I win the bid can I change my mind and take advantage of the HomePath Mortgage Financing?
Thanks
Paulie:
The HomePath program from Fannie Mae, is a Fannie Mae back mortgage program. FHA is a different type of mortgage loan program, and you can always purchase a home listed as HomePath via a FHA Loan, if your situation shows it would be a better way to go.
For example, you could put 3.5% down on this home, (you’ll need an appraisal and mortgage insurance if going FHA) and than compare it to what your payment would be on a HomePath Loan. The rate on a HomePath is likely to be a bit higher, but there is no monthly mortgage insurance payment on a HomePath loan.
Keep in mind, you need to have someone run both scenarios, to see which option is best.
Also, with the HomePath loan, owner occupied or investor, a FICO credit score of 660 or better is needed, as opposed to FHA, which will often go down as low as 620 now. So credit scores can affect which loan to pursue.
Thanks,
Is homepath available for investors?
With the money that is financed into the loan for repairs, how is that money disbursed?
Armando,
HomePath Renovation loans “escrow” the money with a local title/escrow company to pay for the renovations as they are completed. When a part of the renovation is done the lender will approve the release of a part of the escrowed money to the contractor/or buyer.
My credit score plunged down to the 600 range, due to a very recent divorce. I consulted a local mortgage co., and they(thru their credit repair software) showed that if I just paid off the $6k in CC bills I had, it would boost the score up into the 640-670 range. Is this high enough to SURELY get an approval from homepath?
As a last resort, my parents said they would be more than willing to cosign…Would THAT do the trick? btw, their credit is %110 perfect.
Thanks!
Well the no appraisal is nice, but I think I’d still want to get one just to make sure I’m not getting screwed. Plus the higher interest rate equals about the same as an FHA loan would with the PMI. Although the homepath loan is less strict whereas FHA can be quiet ridiculous, but not sure if homepath is truly better than going FHA instead… Pretty even from my viewpoint.
@ Ashley,
The one nice thing is that mortgage interest is tax deductible where-as PMI is not. Both loans will work out somewhat close in final payment but for those having a hard time with the down and closing costs HomePath maybe just that little bit better for them.
is it common for the bank to charge an extra 3.8 percent in fee on a home path loan? (% depending on your credit score?
i applied for a renovation loan on a property for 75,000+25,000 for renovation. i would be charged a fee to do the loan of around 6,300, homepath is giving 3.5 percent back to buyer if closed by may 1, 2010. with will leave me to come up with about 7000 for closing? almost appear as about putting a down payment of 6% down is that common?
You know that doesn’t seem reasonable yet it’s the fees your lender is charging correct? Not an actual additional down payment. What ever the fees are they are, you can always take your loan to another lender who is familiar with a HomePath loan and then see what they would charge you. This way you have a good idea exactly what your options are.
loan officer claims Thats the fee that Fannie Mae/ Homepath charges to do the loan. I guess each bank operates differently. One bank Wanted to charge me a higher interest for the renovation loan, but loan didnt go through when he found out the building had less then 3 condos. If my offer is accepted i am pretty much stuck with paying that extra 3.8%, i checked with another bank but they never return my calls.