The headlines about this product are pretty sexy, aren’t they? The Fannie Mae HomePath loan is one of the most aggressive financing options we’ve seen in quite a while. This program is for purchasers of Fannie May owned properties and can be taken advantage of with primary residence, second home, and investor purchases.
I want to take a minute and go over some of the features, and then get into some details about them. Think, “sizzle” first. Then we’ll talk “meat and potatoes”.
Sizzle:
- As little as 3% down
- No mortgage insurance
- No appraisal required
- Owner Occupants AND Investors
Meat and Potatoes:
To keep this article from becoming too lengthy, I’m just going to go over these points as they pertain to a primary residence purchase. If you want to discuss this in more detail, feel free to contact one of our Veracity Team members.
As Little as 3% Down
There are two Fannie Mae “products”, if you will, that down payment requirements will fall into. Standard and Flex. The standard minimum down payment requirement is going to be 5%. The Flex feature will allow 3%. The Flex program has two caveats. Slightly higher credit score requirements and a slight adjustment to the interest rate pricing.
No Mortgage Insurance
This is one of the most attractive pieces of this program. Low down payment AND no mortgage insurance? Well, that is exactly right. This, of course, is good for the buyer, but it increases the risk to Fannie Mae. A higher loan to value without the safety net of private mortgage insurance will mean a greater risk to financial loss if the buyer were to default on the new mortgage. Because of this, there is a slightly higher premium on interest rates for this product. It is only nominal, but helps alleviate some of that new risk.
No Appraisal Required
This can be spun a couple of different ways. The first positive is that it means less money for closing costs. No appraisal means not having to pay for an appraisal. A question that does come up often though is, “am I paying too much, if we don’t really have an appraisal to compare too?”. That is a fair question, and one that you may want to lean on the advice of your Realtor. Also, even though an appraisal isn’t required, you can still order one on your own. This would have to be on your own, out of your own pocket, and without any assistance from the lender.
I think the “fair deal” rule will apply here, more often than not. If you are looking at a Fannie Mae home, and plan on utilizing the HomePath program, it is tough to compare to another property as a comparable (unless it’s another HomePath property). If the sales price, financing terms, etc., are acceptable to the buyer; and the Realtor has a favorable opinion of value, then it is likely a fair deal.
Owner Occupied and Investors Welcome
This product really sets itself apart from many other financing options in that it is 2nd home and investor friendly. There are a few more pricing considerations, down payment requirements, and credit score criteria with these types of transactions, so please feel free to contact a member of The Veracity Team to go over specifics.
That covers the major components of the Fannie Mae HomePath loan. Because of the many moving parts of this transaction, it is highly recommended that a prospective borrower go through the prequalification process to insure that they can get an accurate rate and cost quote. The process is simple and easy.
