Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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HomePath Renovation Mortgage Vs. FHA 203K?

HomePath Renovation Mortgage

HomePath Renovation Mortgage

Orange County, CA – If you have considered the FHA 203K loan, then it’s likely that you’ve come across the Fannie Mae HomePath renovation loan too. Both do fairly similar things, so it’s a case of weighing the pros and cons of each when it comes to buying that perfect house. Let’s start with the HomePath loan to see just what’s in there for home buyers.

The very first thing to consider is that you can only opt for this home loan if you’re buying a Fannie Mae owned home. So we’re only talking about foreclosures that have originally been financed with the use of a Fannie Mae mortgage product. Obviously this is somewhat limiting. But it’s worth remembering that there are thousands of these properties available, and if you come across one, then you should consider this loan option. Or you can search for these properties in your area by logging on to the Homepath website.

These are the main benefits of a HomePath Renovation mortgage.

  1. The down payment can be as low as 3%, which skims a little off the top of the FHA 203K 3.50% down payment.
  2. Credit rating requirements for this type of loan are perhaps a little more stringent than with an FHA 203k.
  3. There is no mortgage insurance. However, you will find that this is offset by the interest rate that’s offered. Typically it’s higher than the same purchase with mortgage insurance. Therefore, we need to analyze both sides of the coin.
  4. No appraisal will be required for the property. This is great for properties that clearly would not stand up to an appraiser’s scrutiny.
  5. The property does not need to be a primary home like it does with FHA 203k. 2nd home buyers and investors can utilize this loan program. A 10% down payment is required to purchase the property as an investment. This is considerably less than the 20% minimum required on every other investment loan.
  6. Mortgage insurance terms. The cost of insurance for the FHA loan has gotten increasingly more expensive over the years. That trend has not shown signs of reversing. In addition, the terms of the mortgage insurance may soon become more prohibitive. Currently, FHA requires a homeowner to hold their mortgage insurance n a 30 year fixed loan for a minimum of 5 years. Then if the loan is 78% of the value the mortgage insurance will fall off. The HomePath Renovation program is a conventional loan. Dumping the mortgage insurance on one of these loans is considerably easier. As soon as you can prove the loan to value has reached 80% you can request that the mortgage insurance be removed.
  7. The HomePath Renovation loan will provide you with 35% of the “as-completed” appraised value or $35,000, whichever is less. This can be applied toward the work required to improve the property and deal with necessary repairs. The home rehab work must be permanent and add value to the property.

After reviewing the HomePath Renovation loan it’s clearly different than the FHA 203K loan. It’s enough for you to compare them both side by side. We can talk through the loans available to you, and decide together which option is going to be best for you, given the circumstances and the property you are hoping to buy. Contact me at any time if you wish to discuss your options relating to the home buying process, and hopefully we can find the right path for your home buying journey!

Scott Storace

 

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