What is Home Path Financing

With the number of REO properties increasing, I’m being asked more often about HomePath financing. HomePath financing is available for Fannie Mae REO’s with the HomePath logo found on HomePath.com. I’ve personally noticed a significant increase in questions about this financing so I thought I would cover the basics. First, there are two types: a Home Path Mortgage and a Home Path Renovation Mortgage. The difference being, the Home Path Renovation Mortgage will allow minor fixes to the property.

Here is a quick synopsis of the Home Path Mortgage:

Minimum 3% down for primary residence, 10% down investment property
Borrower can own up to 10 financed properties (but need 25% down if they own more than 4)
NO APPRAISAL NEEDED
NO MORTGAGE INSURANCE
High balance (jumbo) and interest only products available
Seller contributions can be 6-9% on primary residence (the larger the down payment, the larger the allowable contribution), only 2% on investment property
This loan does price with a higher rate than your average 30 year fixed conforming loan. If you want an equivalent rate to the going 30 year fixed, this loan would price with an additional approx 1% to 3.75% discount points. Keep in mind, much of this can be covered by the seller and there is no mortgage insurance. Of course one can just opt for the higher rate in lieu of the discount points.
Same basic underwriting requirements of a conforming loan, but without the property issues (appliances missing - no problem)
The HomePath Renovation Mortgage is currently only offered by 3 lenders nationwide. This will allow for light renovations to the property that can be included into the loan. Information about this specific product is scarce. In general, renovation and construction type of products work like this:

An appraisal is done “subject to” the completion of the repairs. The value will typically be the appraised value or the cost of the house plus renovations, whichever is lower. The down payment is based on this value (hence, most of the renovation work gets financed into the loan).
The loan closes and the repairs are completed by a licensed contractor within a specified amount of time
There is more involved with these types of loans, such as: bids, inspections, draw schedules, etc.
The interest rate is typically higher than your general conforming 30 year fixed
Overall, the Home Path Mortgage is a great loan. I can’t attest to the Home Path Renovation Mortgage but I’m sure it’s great loan as well. If you are “handy” and can do most of the work yourself, you may consider the Home Path Mortgage. When a lender is going to finance renovation work, they will require the work to be completed by a licensed contractor so this sometimes may not work for the “do-it-yourself er”.