The Fannie Mae HomePath Loan
A Fannie Mae HomePath loan is only eligible for properties that are owned by Fannie Mae and are listed on www.homepath.com. The biggest difference in a HomePath loan versus a Conventional loan is that it doesn’t require an appraisal and if you put less than 20% down you will not have mortgage insurance (you will have a much higher than normal rate though).
A lot of people in the industry push this loan because it is easy since an appraisal isn’t required so there won’t be problems with the value coming in too low and the lender won’t know about any repairs that are needed. What is good for us in the industry doesn’t mean it is good for the borrower.
As a buyer you still want to get an inspection to make sure there are not any issues. I would even recommend getting an appraisal because you don’t want to over pay for the property. I had a buyer who was buying a HomePath eligible property but since we had a non-occupant co-borrower I had to give them a Freddie Mac loan and we had to get an appraisal. The property was under contract for $125,000 and the appraisal came in at $95,000. That is a big difference. If this buyer went with a HomePath mortgage they would have never known this.
I do understand that appraisals have tougher rules to follow and for this particular transaction the most recent sales were from November 2009 but you can see my point. This is just another reason you need to deal with a Mortgage Professional who is going to explain these things to you. Getting a mortgage product you don’t understand is what got us into this mess in the first place.