hat The Lender Says On How Much I Can Borrow Does Not Mean I Can Afford The Monthly Payments

Buying Foreclosures And Fixer Uppers With Homepath Loans

ByGustan Cho

This BLOG On Buying Foreclosures And Fixer Uppers With Homepath Loans Was UPDATED On October 28th, 2018

Fannie Mae’s HomePath Loan Program no longer exists. Many of our borrowers buying fixer uppers and foreclosures are going with our FHA 203k Rehab Loan Program. Homepath loans used to be a great way to purchase a Fannie Mae inventoried property with very little down with no mortgage insurance nor appraisal required.  These were conventional mortgage loans.

  • Minimum down payment for owner occupied homes is 3.5% down payment
  • There was no appraisal required because these homes are owned by Fannie Mae and being sold by Fannie Mae
  • There was no mortgage insurance required

In this article, we will discuss and cover Buying Foreclosures And Fixer Uppers.

Fannie Mae HomePath Program

Fannie Mae launched HomePath Home Loans and the HomePath renovation mortgage program back in 2009. The program was launched to relieve the tens of thousands of residential homes it had in its inventory from the real estate and financial meltdown of 2008.

  • Fannie Mae’s inventory of homes was multiplying by the tens of thousands month after month from the real estate meltdown
  • Fannie Mae’s inventory increased through monthly foreclosures
  • At times, there seemed like there was no end in the amount of inventory 
  • Inventory eventually stabilized
  • Fannie Mae’s HomePath Home Loan program finally came to an end
  • Homebuyers interested in purchasing foreclosed properties can still buy it from Fannie Mae but HomePath mortgage loan program has been discontinued

Gustan Cho Associates is a national five-star mortgage company with no mortgage overlays on government and conventional loans. We offer FHA 203k Rehab Loan Program for homebuyers who are interested in buying fixer-uppers. We will discuss the two different types of FHA 203k Loan Program USA Mortgage offers. 203k Loans are acquisition and construction financing all in one loan program with a 3.5% down payment on the after value of the property.

How Does The HomePath Program Work?

Fannie Mae has an inventory of Fannie Mae properties.

  • Fannie Mae is not a direct lender to consumers on HomePath Loans
  • Fannie Mae created HomePath Lending Guidelines for lenders if these mortgage lenders want Fannie Mae to buy back the HomePath Loans they originate

Fannie Mae’s down payment requirements are a 3% down payment for owner-occupied homes and 10% down payment for second and investment properties.

Buying Foreclosures

Since Fannie Mae’s HomePath real estate program is foreclosed properties owned by Fannie Mae, these properties are not in the best of condition.

  • Therefore, Fannie Mae’s HomePath program also offers acquisition and renovations loans where HomePath property buyers needing repairs can benefit from the HomePath renovation mortgage loan program
  • The mortgage loan can be up to 97% loan to value of the finished project:  Market value after repairs

What Were The Qualification Requirements On HomePath Loans

Mortgage loan borrowers who were interested in HomePath Financing needed to qualify for the program.

  • HomePath Mortgages were conventional loans so conventional mortgage lending guidelines apply
  • Minimum credit scores of 660 are required
  • Minimum down payment for owner occupied homes are 3.5%
  • For second homes and investment properties, the minimum down payment is 10%

Debt to income ratios are as follows:

  • 31% front end debt to income ratio
  • 43% back end debt to income ratio
  • Potential HomePath home buyers had a selection of over 100,000 plus homes that were available by Fannie Mae by visiting Fannie Mae’s HomePath’s website at www.HomePath.com

The qualifications for HomePath Financing were much tougher than those of FHA 203k Rehab Loans.

Advantages Of Purchasing Properties With HomePath Loans

The first 15 days any HomePath properties come out in the market, the only owner-occupied home buyers can qualify to put offers.

After 15 days, then investors can participate in the bidding process.

  • There is no appraisal required for HomePath loans
  • Buyers did not have to get  HomePath Financing to purchase a HomePath property

Home Buyers could purchase a Fannie Mae’s HomePath property with an FHA loan or regular conventional loan or even cash.

What Were Benefits Of HomePath Loans

Another big advantage of HomePath Loans is that it did not require mortgage insurance even with a 3% down payment.

  • HomePath loans had higher mortgage rates than regular conventional loans
  • Mortgage rates are about 0.50% higher than market conventional mortgage rates

However, with the no mortgage insurance requirement, the monthly mortgage payment will be lower with the higher mortgage rate.

2018 Update On HomePath Loans

Fannie Mae has discontinued the Fannie Mae HomePath Loan Program in 2014.

  • Fannie Mae HomePath still continues HomePath properties
  • But Fannie Mae is no longer offering the Fannie Mae HomePath mortgage loan program

HomePath property buyers can use other loan programs such as the following:

  • FHA Home Loans
  • FHA 203k Loans
  • VA Loans
  • Conventional Loans

FHA 203K Loan Program

HUD, the parent of FHA, has long had the FHA 203k Loan Program.

There are two types of 203k Rehab Loan Program under HUD:

  1. 203k Streamline
  2. Full 203k Rehab Loan

The maximum loan limit with an FHA 203k Streamline is $35,000. With a full 203k Rehab Loan, there is no limit on the construction funding. Homeowners can do complete gut rehab with full FHA 203k Loans.

Home Buyers who need to qualify for FHA 203k Loan with a five-star national mortgage company with no lender overlays on FHA 203k Loans can contact us at Gustan Cho Associates at 800-900-8569 or email us at gcho@gustancho.com.