If you’re trying to buy one of Fannie Mae’s foreclosed properties, you should look into a HomePath loan. These loans aren’t available to all homebuyers or from all lenders. For foreclosed homes, this type of home loan has clear advantages.
One of the advantages of a HomePath loan is the ability to secure a loan with only a three percent down payment for owner-occupants. Investors can also secure HomePath loans, but with a 10 percent down payment instead. Unlike with a conventional loan, a down payment this small will not require you to get home mortgage insurance. This is true of all HomePath loans, regardless of down payment size.
Many buyers can also benefit from the ability to get a HomePath loan without an appraisal on the property. Even if you’re willing to pay more for a home than it appraises for, your mortgage lender likely won’t be and will deny a loan for more than the property is valued at. This isn’t a concern with a HomePath loan. All HomePath properties are appraised before they go on the market, so additional appraisals are not necessary to determine whether the price asked matches the value of the home. Of course, you should still get any home you’re seriously considering inspected so you know what problems it might have, but this inspection won’t derail your purchase.
If the home you’re looking at is a fixer-upper, you can get a HomePath loan for more than the purchase price. That is, you can secure a HomePath loan for up to 97 percent of the value of the house after the repairs have been made, with the extra money being paid to the contractor you hire to do the repairs for you. This gives you an easier way to purchase a home that may need some work, as many lenders won’t offer loans on properties that are not able to pass a home inspection at purchase time. These types of loans are also referred to as 203k loans.
There are some things to keep in mind when considering this type of loan. Only borrowers with very good credit scores can quality for these loans, particularly if you don’t intend to put more than three percent down. You’ll also end up paying a higher interest rate for the loan, though the actual rate will vary depending on credit history and other factors. It’s important to remember, though, that without a monthly insurance payment, the higher interest rate may not increase your costs significantly. For many people, the extra cost from the higher interest rate is offset entirely by the lack of an insurance payment. Some even end up paying less each month with a HomePath loan than they would with a conventional or FHA loan, despite the higher interest rate.
Home Loans 