The Pros and Cons of Buying a House With a HomePath Loan

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One of the real estate industry’s best-kept secrets is the ability to buy a home that is in good shape, at a great price and without having a lot of the extra fees that buyers have to endure with other loans.  The Fannie Mae HomePath program is an in-house program that is set up primarily to list, sell and finance homes that are bank-owned by the organization.

There are several advantages to a HomePath home that work well for first-time buyers or those looking to buy up considering the current market conditions.  Though there are a few restrictions, this product offered by Fannie Mae is by far the most advantageous for several reasons.

Lower Closing Costs

Closing costs entail anywhere from 2.5% to 4% of the total purchase amount and include things like loan origination fees, discount points, appraisal costs, surveys needed for the property, underwriting fees, title search and insurance fees and other purchase-related fees.  Fannie Mae provides loans with lower closing costs allowing the buyer to pocket more cash at the end of the deal.

No Appraisal Needed

One of the best aspects of a HomePath loan is that there is no appraisal requirement.  This benefit works in two ways.  First, the buyer is spared the cost of getting an appraisal done on the property, something that would normally cost anywhere from $350 and up depending on the home.  Second, fewer delays occur with one less step in the process.

No PMI Requirement

One of the hardest hit realities of owning a home when you do not have at least 20% to put down on the purchase is the need for Private or Primary Mortgage Insurance. This is set up to protect the lender in case of default on the loan.  Fannie Mae does not require any PMI for HomePath properties, which leaves HomePath homeowners with a lot of extra cash in hand every month for the entire life of the loan. FHA loans have an upfront mortgage insurance fee in addition to a monthly mortgage insurance fee. With Fannie Mae’s HomePath program you end up avoiding both.

No Obstacles for Condos and Townhomes

Unlike this program, conventional loans have a host of requirements for buyers wishing to purchase a condo or townhome.  Things like owner occupancy percentage and dealing with the corresponding Homeowners Association’s requirements are not a factor in determining mortgage eligibility for HomePath loans.  In fact, condos and townhouses are one of the more difficult types of property to purchase without meeting all requirements.

Low Down Payment, Flexible Terms and Allowed Seller Concessions 

The homeowner is not left without any choices.  In fact with a loan from Fannie Mae you can still make a down payment as low as just 3% and the funds can come partially or entirely from gifts given by family or friends as long as they do not have a financial interest in the purchase.  In addition, HomePath loans are flexible – you can get a fixed rate, adjustable rate or interest only mortgage.

In a buyer-controlled market one of the advantages of increased seller competition is the inclusion of seller concessions in the sale.  Fannie Mae does not prohibit seller contributions toward closing costs – adding one more way for buyers to save in their purchase.
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As with most programs, there are a few guidelines you need to adhere to.  The HomePath loan program requires that the home be purchased and used as the primary residence and to be sure Fannie Mae for can conduct an audit up to a year from the date of sale.  Finally, only qualified Realtors must sell HomePath homes and not all brokers are licensed to sell Fannie Mae homes so it is important to find a Realtor that does handle these properties.  The loan is only applicable on Fannie Mae bank-owned properties but with interest rates at their all-time historic low, now is an excellent time to buy!

Anything Can Go Wrong With Your Loan – Here’s How To Avoid It

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There are some common misconceptions floating around about there not being enough money in the bank when it comes to mortgages.  This could not be further from the truth.  Lenders have plenty of money.  Sure, they are being more careful about who they lend it to and yes they are definitely making sure all i’s are dotted and t’s crossed.  But here’s the thing:  do you want to have to jump through hoops of fire or would you rather sail through the mortgage loan process smoothly?

With our special report that shares with you the real estate industry’s insider information on the top reasons loans go awry, you can avoid having to go back to the drawing board over and over again and ultimately risk losing your loan (and your dream house) in the end.

Accuracy of Information is Key

As you sign your loan application you will notice that there is a mountain of paperwork.  One of the most damaging things to a loan app however is when there are discrepancies within the paperwork.  As long as you can vouch for your information, provide accurate and updated data and support it with plenty of documentation – your loan application should not suffer any major delays or cancellation.  This applies to basic information such as names and aliases to employment history to past judgments or other negative financial factors that you need to report.

Incomplete forms and less-than-adequate supporting documentation such as W2s or payroll stubs are just one of reasons a loan officer will move on to the next borrower’s paperwork.  It is important not to be offended if you have to provide a lot of details.  When it comes to things like the source of your extra income, where and from whom you received cash gifts or other sensitive information like that, a lot of homebuyers get squeamish.  In fact, borrowers should be prepared to do a lot of “explaining” through what loan officers call Letters of Explanation for things that are not crystal clear or cut and dry.  And there are a lot of things that simply do not add up without an explanation at hand.

Processing Makes Perfect

Anyone that has gone through the process of applying for a mortgage knows that it takes time.  Even if every single aspect of the app were perfect it would still take time.  Some delays can be avoided, all of which can be done by making sure there are no outstanding liens on the home, providing and being able to confirm the source for all funds used in the transaction and ensuring all necessary repairs are done in advance.

One of the most frustrating aspects of going through a mortgage loan process is when a step adds days and days to the timeline.  With each item that needs further clarification, additional investigation or more, more time is added and more frustration ensues.  The single best way to avoid this problem is to provide as much information as possible from the start.

(Almost) Everything Can Be Fixed

By working with the right Realty and mortgage team you can turn around most of the issues that come up as roadblocks in the process.  It takes time but it can be done.  To find out more about what may go wrong with your loan, email us and we’ll send you a copy of our free report with the top reasons loans go bad and how you can avoid each.