Are you going Home Path?

It was great to hear from so many of you in response to last week's down payment assistance article and very comforting to see that many of you share my beliefs.

Recently I received an e-mail from one of my lenders about a new program called Home Path. This program is produced and backed by the government (sort of) and says it can provide up to 97% financing for qualified borrowers wanting to purchase an eligible Fannie Mae owned property. Sounds like we are right back to our old tricks.

I understand that Fannie Mae needs to move some foreclosure homes off their books but what is there a problem with the 5%, 10% and 20% down loans? Home Path offers a 3% down loan but we already have a program like that called FHA. An FHA loan is a nice product for those with some credit bumps and bruises and a limited down payment amount but it's also expensive for me to process. Since it doesn't make financial sense for me, I choose not to use it.

What the new Home Path program is an FHA program for the conventional world. Let me read you some of the guide lines from this new program:

Eligible: Client puts down just 3%; a 660 credit score or above is required; the down payment can be funded by the borrowers own savings, a gift, a grant or a loan from a non-profit organization, state or local government or employer. This loan is available for purchase transaction only. Eligible properties include primary residence, second homes and investment properties.

There is no appraisal required nor is mortgage insurance required. Specific mortgage insurance adjusters may apply, however. That means that they are not going to charge monthly mortgage insurance, but they are going to move the interest rate up a little so that every month they're getting more in interest. It's available for fixed rates, ARMs, and interest only products. Again, I have a problem with only having to put 3% down on an ARM or interest only loan.

Want to talk about how quickly one could get upside down in such a mortgage? If the market takes another downturn as it did a couple of years ago, this loan would only lead to more foreclosures.

For the investment side, it says up to 90% for an investment property, thus a 10% down payment. We have changed the guidelines to require a 20% minimum down payment on investment loans but now we are being offered a semi government-backed loan product that will allow somebody to purchase investment property with only 10% down, and no appraisal.

I have a problem with this program because it seems to be doing some of the things that got us into trouble in the first place. Repeating past mistakes will only bring the same results. I hate to sound like the grumpy old lender who likes folks to have a down payment when they buy a home, but I guess I am.

Thanks for reading.

Geoffrey Davis - the "Frisco Mortgage Guy"!

214-975-1266- fax

214-529-9622- cell

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