HomePath Financing

This month, I would like to talk about a little know mortgage program called the Fannie Mae HomePath.  This unique mortgage program is only available to purchase Fannie Mae foreclosure properties.  If you have been thinking about purchasing a new home, this might be an excellent option to look in to.  Here are some of the highlights:

1. Only requires a 3% down payment on purchase of a primary residence.
2. Only requires a 10% down payment on the purchase of an investment property.
3. No upfront mortgage insurance (MI)/guarantee fee.
4. No annual/monthly mortgage insurance premium (MIP).
5. No appraisal required.

Additionally, Fannie Mae is currently offering 3.5% toward your closing costs if you write an offer after April 11, 2011 and close before June 30, 2011.  To take advantage of that offer though, you would need to get an offer submitted and accepted by around May 15, 2011.

HomePath is a great alterative to FHA financing for borrowers with good credit looking to buy their primary residence.  Let’s look at a comparison with today’s rates:

FHA Program Primary Residence
Purchase price: $200,000
FHA Minimum Down Payment: $7,000
Interest Rate: 4.50% (no points)
FHA Annual MIP: 1.15%
FHA Upfront MI: 1% or $1,930
Loan Amount: $194,930
Total Payment (Principle, Interest & MI): $1175

HomePath Program Primary Residence
Purchase price: $200,000
HomePath Minimum Down Payment: $6,000
Interest Rate: 5.50% (no points)
Annual MIP: 0%
Upfront MI: 0%
Loan Amount: $194,000
Total Payment (Principle, Interest & MI): $1102

If you were to take advantage of the Special that Fannie Mae is currently offering with 3.5% seller concesions to cover your closing costs, your rate could be around 4.625% giving you a total payment of $998.

Now if you wanted to consider the financing options as an investment property, the biggest incentive is the low down payment requirement.  Typical conventional financing requires at least 20% down to purchase an investment property but with the HomePath Program, that requirement is cut in half to 10%.  On a $200K purchase, that is a difference of $20,000.  And the rates are even better than a typical conventional investment loan with 20% down.

To find Fannie Mae forclosures that are eligible for HomePath Financing, go to www.HomePath.com.