I have seen a few blog posts stating that Fannie Mae is offering special Homepath financing on the properties that they own. You can find properties that qualify for the home path mortgage HERE.
Most of the time if the property qualifies for this loan it will be noted on the MLS sheet. Recently one of the buyers I've been working with emailed me a link to a home that qualifies. I had them preapproved to go FHA. We went to the house and looked around. It didn't take long to realize that in its current condition this house could not go FHA.
The problems were the following - Leaking roof, hot water heater not connected/didn't work, furnace from a company so old not even the contractor could identify it, and signs of some water issues in the master bath (unrelated to the roof).
Thanks to the blog I had read here at ARI knew that we might have a shot at this property using the homepath financing, but I didn't know any details. I started calling around and learned a lot about the loan over 2 days time.
Before I start explaining how the loan works I'd like to add that there are two type of homepath loans. One is a standard homepath, and one is a renovation loan. Fannie Mae has predetermined which type of homepath loan each property qualifies for.
The standard loan is simply 3% down, no appraisal, no PMI, and can close in about 45 days. Since there is no appraisal any small problems with the property can be overlooked. This is a great deal for a property that is in decent condition. More information is available at www.homepath.com.
The property that my buyers are interested in only qualifies for the renovation loan. This loan seems to be a very valuable product for a home that needs some work. It works like this.
The home will be listed at a certain price, lets say 200,000 for this example. We'll use the problems listed above for our homes issues. Before making an offer we wanted to have an idea how much it was going to cost to make the necessary repairs (We have a price constraint pretty close to the current asking price). Earlier today I met a contractor at the property but I haven't gotten an estimate yet so the numbers will be arbitrary but it should help you understand the loan. We'll say our house needs $25,000 in repairs.
We start by negotiating with the current sales price of 200,000. We will offer 180,000 with 6% ($10,800) back for closing, and its accepted. Once we have negotiated a contract price the homepath loan will let us add up to 20% of the sale price in repairs. In our case $36,000 in repairs (this is the absolute maximum) but we only need $25,000.
Our general contractor must be approved by Fannie Mae, but for simplicity our guy is approved. So we go to settlement on the property in its current condition. The loan amount will be 180,000 + 25,000 for repairs for a total cost of $205,000. $180,000 will go to Fannie Mae at settlement. The remaining $25,000 will be put in an interest bearing account and will function like a construction loan. As the work is completed more funds will be released until the work is done. Once the work is completed the appraiser will come out to verify everything that was supposed to be done is completed.
NOTE: I asked how long it would take an inspector to get to the property for inspection between draws of the $25,000 and they said about 7 days. So if your contractor is on target he might want to order the inspector to come out a few days before he has completed all the work to keep the ball rolling.
This is a great offering from Fannie Mae for less than perfect properties. It won't solve all problems but for the right buyers this is a very appealing loan product.
Investors?
Homepath is available for you too with 10% down for renovation loans.
