HomePath Program: Financing Fannie Mae Homes in Phoenix, Arizona

photo credit: James JordanWith the looming FHA changes coming this April I thought this would be the time to point out Fannie Mae’s HomePath mortgage program.

In many cases  FHA loans are still more advantageous to the borrower due to lower FICO Score Requirements (620 or better is ideal – this is why keeping your FICO Score is so crucial), lower down payments of 3.5% and allowable seller concessions up to 6% twoards closing costs and prepaid expenses. One of the disadvantages of the FHA loan is that and Upfront Mortgage Insurance Premium of 1.75% is required and is set to increase to 2.25% on April 5th 2010. In the grand scheme of things the increase of the Upfront Mortgage Insurance Premium is not such a big of a deal compared to the proposed increase in down payment requirment for borrowers with credit scores of 580 and reduction in allowable seller contriubtions.

With these impending changes in the FHA guidlines it would not hurt to take a second look at Fannie Mae’s HomePath Program when financing a home in the greater Phoenix Metro area.

The highlights of the HomePath Program are:

• For Owner Occupants the down payment requirment is still only 3% primary residences
• Second Home Buyers are getting away with putting down only 10%
• Investors also can use the HomePath Program to buy investment properties with 10% down
• NO mortgage insurance premiums
• NO appraisals – since Fannie Mae is selling the property there is no appraisal required
• Seller concessions are allowed up to  6% for primary residences, 6% for 2nd homes and 2% for investors.
• Conforming Loan Limits apply

Of course there are a couple of drawbacks:

Borrowers must have a 660 Credit Score, Interest Rates are slightly higher and the loan program can only be applied to Fannie Mae owned properties.

With FHA guidelines tightening and investors already having their own FICO score overlays on FHA products, we are already pretty close to the 660 minimum score required for HomePath. Don’t get me wrong 40 points on a credit report is still a pretty big gap to breach for many borrowers, however if your credit allows, and you find a Fannie Mae owned home then it is sure nice not to having to deal with appraisals. The slightly higher interste rate for HomePath comes pretty close to a wash with the MIP required for FHA Loans.

Foreclosure inventories in Arizona, especially in the Phoenix Metropolitan Area remain extremely high and chances are pretty good that you can find a Fannie Mae owned property, and if it is a diamond in the rough then you can take advantage of the HomePath Renovation Mortgage to fund both your purchase and light renovations.

To give you an idea what is available for sale check out http://www.homepath.com/

As always, if you have any questions please feel free to contact me anytime.