John Asks … I have a contract to buy a foreclosure and the agent is telling me that I should use HomePath financing. Is that a good idea?

Hi John, first of all let me just say that HomePath financing through Fannie Mae can make buying a foreclosed home much easier on you. In fact, more and more foreclosed homebuyers are learning that HomePath financing allows you to avoid the traditional roadblocks involved with purchasing a foreclosed home. So with that being said, let’s take this as the chance to outline the pro’s and con’s of HomePath financing.

Pro’s:

  • A HomePath Mortgage doesn’t require a property inspection. Fannie Mae already knows the value of the property they are selling. It is difficult to get a traditional mortgage on a foreclosed home because it is likely to not pass the property inspection required by mortgage lenders.
  • A HomePath Mortgage does not require mortgage insurance. Most properties require mortgage insurance when your down payment is less than 80% the value of the property. In the long run, this will save you a significant amount of money and your monthly payments will be lower than other types of financing
  • A HomePath Mortgage financing does not require the property to be appraised, unless you plan on borrowing money to make renovations. If you are, then financing can be for as much as 97% of what the home will be worth once the renovations have been done.
  • 3% down payment is all that is required if it is your primary residence and up to 3% of closing costs are usually paid by Fannie Mae.

Con’s:

  • Fannie Mae does not directly lend to buyers. Fannie allows lenders to finance their properties with just a 3% down payment from the buyer. With this being said, if you plan on just putting down 3% most lenders require that you have a credit score of at least 660.
  • HomePath mortgages have slightly higher interest rates. Generally, HomePath rates are about a quarter to half of a percentage point higher than the rates on the conventional loans. Keep in mind though, you can easily make up for this by paying zero mortgage insurance.

So in the end, if you are considered purchasing a foreclosed home an idea worth considering is doing so with HomePath financing. These loans make buying and repairing foreclosed homes feasible!

Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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One Response to John Asks … I have a contract to buy a foreclosure and the agent is telling me that I should use HomePath financing. Is that a good idea?

  1. Pingback: Making Use of Home Path Mortgage to Buy Real Estate « Mortgage Rates Co.

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