Editor’s note: Fannie Mae discontinued the HomePath program on October 6, 2014. Buyers must have had a completed home purchase contract dated on or before this date to use the HomePath program.
The reason? Fannie Mae has decided that its portfolio of foreclosed homes (aka REO properties) is shrinking and special incentives are no longer needed.
For buyers who have a signed purchase contract after October 6, Fannie Mae has loosened guidelines somewhat for its REO properties. Keep in mind that these updates only apply to properties that formerly qualified for the HomePath program:
- Maximum seller contributions of 6% of the purchase price when the down payment is less than 10%.
- When the buyer owns more than 4 financed properties and is buying a 2-4 unit home, the maximum Loan-to-Value is increased to 75%.
In short, buyers of HomePath properties will experience a few changes:
- HomePath buyers will now need an appraisal. HomePath Renovation homes will not pass minimum property requirements. However, there is a renovation program available through FHA. See our FHA 203k page.
- Many HomePath properties are still available at 5% down, although private mortgage insurance (PMI) will be required. The additional cost will be minimal. While HomePath loans did not require PMI, they typically came with higher interest rates.
To find out about HomePath program alternatives, complete this short online questionnaire and an expert will contact you to find the best program for your needs.
Read on to find out more about the retired HomePath program.
Fannie Mae HomePath
In recent years, buying foreclosures has been an increasingly popular home buying choice. In the past, real estate investors purchased foreclosed homes on the cheap to build their portfolios.
Now, foreclosed homes are also a great idea for buyers looking to buy their first home or an additional home. Fannie Mae has a special program designed to promote and sell their inventory of foreclosed homes to the general public and they list those homes for sale on their website.
What is a HomePath Loan?
HomePath is the name given to Fannie Mae’s program to sell real estate it owns. These homes have been foreclosed on, and now ownership has gone back to Fannie Mae, the owner of the loan. Like any mortgage holder, Fannie Mae does not wish to hold real estate, but offload it to a buyer as quickly as possible. That means great deals and amazing financing options for you, the buyer, through the HomePath® program. These properties allow borrowers to buy a Fannie Mae-owned home with easier requirements than a traditional loan. The main benefits are:
- You can buy a home with a 5% down payment (Note: Before November 16th, 2013, only a 3% down payment was required. It has been increased to 5%).
- No appraisal is required
- No private mortgage insurance is required
- This loan is available for second homes and investment properties
Prospective buyers can visit the HomePath website, enter in any city or zip code where they’re interested in buying, and a list of available properties will appear. The property’s complete description, address and photos are listed along with important details about the property including the real estate broker listing the property.
For homes that qualify for HomePath® financing, the HomePath Mortgage logo appears with the listing. Keep in mind that many, but not all properties on the HomePath website are eligible for HomePath financing. In addition, there is a HomePath sub-program called HomePath Renovation, with which a buyer can buy the home and finance repairs with one loan. See our HomePath Renovation page.
In the Map Search option, you can narrow results by state and county, and narrow your results even more by bedroom and bathroom count, square footage, and price. You can even save your filters for future searches. Upon finding a home, you can apply with an approved HomePath lender. The loan application process will be similar to that of other loan products.
What Income Do I Need to Qualify for Homepath?
Standard debt to income ratios apply to all HomePath loans and income must be documented with pay check stubs, W2s and filed income tax returns. These programs are considered “fully documented” loans, meaning all income and asset information will be verified.
The suggested maximum debt ratio for this program is currently listed at 45, meaning no more than 45 percent of a borrower’s gross monthly income is used to meet credit obligations. That means if your monthly income is $5,000, your monthly principle, interest, property tax, homeowner’s insurance, as well as all other monthly debt payments should not exceed $2,250.
$500 Minimum Investment
The HomePath program requires a minimum down payment of 5 percent for a buyer purchasing a home they intend to live in. Borrowers are also eligible to receive down payment assistance from approved public agencies or other eligible gift sources.
Gift funds can be used for the down payment as well as closing costs. When using down payment assistance, the borrower is required to have at least $500 of their own money invested into the transaction. For buyers purchasing a second home or investment property, the down payment requirement is 10% of the purchase price.
Appraisal and Credit
There is no appraisal required for a HomePath home. Homes listed for sale on the HomePath site are sold “as is” and a property inspection is recommended. However, the homes are considered “ready for sale” and some have had improvements made to them after the foreclosure. Homes that have had improvements made have a logo next to their listing indicating additional work has been done.
Keep in mind that some work may have to be done on many HomePath properties. Fannie Mae realizes that these properties would be hard to finance with typical FHA, VA, or conventional financing due to their condition. But if you want a great deal and want to put some sweat equity into the property, HomePath might be for you. Of course, some of the properties may already be in good condition. Check HomePath mortgage rates here.
Additional HomePath Requirements
Occupancy. You can purchase a HomePath property as a primary residence (meaning you intend to live in it), a second home, or an investment (rental) property.
Credit. There are minimum credit scores required for all HomePath mortgages, with 620 as the minimum score for purchases with more than 20 percent down and 660 for purchases with less than 20 percent down. The borrower must also be “foreclosure free” for the previous seven years. These standards may vary by lender. The loan must be approved using Fannie Mae’s automated underwriting system, Desktop Underwriter or Desktop Originator. These are computerized evaluation systems that are used by qualified HomePath lenders.
Loan Amount. Maximum loan amounts for HomePath properties adhere to existing Fannie Mae loan limits for other Fannie loan programs, with most home loans capped at $417,000 and higher in certain locales deemed “high cost” areas. Get pre-approved for a Fannie Mae HomePath loan here.
Eligibility. Check for the HomePath logo when viewing a property on the website. The logo indicates that the property is eligible for HomePath financing.
First Look Program. Buyers who intend to occupy the HomePath home as a primary residence are eligible to view and purchase a property before real estate investors are allowed. This exclusive option period lasts for the first 15 days a home is listed for sale in the HomePath program.
HomePath Program Q&A
Where do I find a HomePath lender? Qualified HomePath lenders can be located on the HomePath website.
Can I get an adjustable rate using a HomePath loan? Yes, both fixed rate and adjustable rate loans are available using HomePath financing.
How do I know if the property is in good shape? The homes listed for sale have all been prepared for sale and some have had improvements made. Homes that have had work performed on them will be identified with a logo next to the listing. However, all properties should be inspected by a professional home inspector prior to purchase.
How do I make an offer on a HomePath home? Your offer is submitted to the listing agent responsible for marketing and selling the Fannie Mae-owned home to the public. You should also use the services of a buyer’s agent to help walk you through the process. As with any purchase, get pre-approved for the HomePath loan, and go from there.
Do I have to use a HomePath mortgage when buying a HomePath property? No, any type of financing is eligible for these properties. However, there’s a big advantage in using HomePath financing, like only putting 5% down and not having to get an appraisal. If you have further questions about HomePath, you can complete our no-obligation form and a loan professional will be in touch.
Tim Lucas (NMLS #118763) is a mortgage writer with over 11 years of experience as a loan originator, processor, and team manager. Get a live rate quote for your home purchase or refinance at MyMortgageInsider. Visit Tim on Google+ and Twitter.