Here is a comparison of the two loan products:
FHA:
- Down payment requirement: 3.5% down payment minimum.
- Requires financed upfront mortgage insurance premiums and monthly mortgage insurance premiums.
- FHA appraisal conditions required.
- No declining market conditions.
- Interest rates are extremely competitive.
- Minimum 620 credit scores with most investors.
- Primary residences only, no 2nd homes or investors.
- Financing available to FHA county loan limits.
- Eligible properties: FHA approved condos, single family homes, planned unit developments and manufactured housing.
- Seller concessions: 6% toward buyers closing costs and prepaid expenses.
Fannie Mae HomePath:
- Down payment requirement: 3% minimum on primary residences and 10% down minimum on 2nd homes and investment properties.
- Does not require any mortgage insurance premiums.
- No appraisal required, home must be Fannie Mae owned.
- No declining market conditions.
- Interest rates are less competitive.
- Pricing of the loan is less competitive.
- Minimum 660 credit score requirements.
- Primary residences, 2nd home or investors are eligible.
- Financing available to conforming loan limits.
- Eligible properties: Fannie Mae approved condos, single family homes, planned unit developments.
- Seller concessions: 6% for primary residences, 6% for 2nd homes and 2% for investors.
As illustrated, both of these loan products have benefits and drawbacks. For a typical homeowner planning to buy a home for their primary residence, FHA is by far a superior product allowing lower costs of the loan and payments. However, if you are looking for a great investment loan alternative, the HomePath product is an excellent fit.
The HomePath loan has much more flexibility with certain options, but could be challenging given the higher interest rates, cost of loans and minimum credit score requirements. These factors all depend on your specific financial needs.
If you have specific questions and need further advice, please feel free to call or email me. Every situation can be different.
Gary Miljour is a licensed Loan Originator (NMLS ID: 207208) in the State of Arizona.
MyCityLender | NMLS ID: 161428 | ARIZONA MB-0910380 
This is good information. My question is what would be an average interest rate for the Homepath mortgage? You had mentioned that it was higher.
Thanks,
Kris
Kris,
When I checked and compared it to FHA it was between 1.00% to 1.25% higher on the rate plus the closing costs were at least 1% higher.
Is the homepath renovation program available to investors? I was looking at homepath.com and it looks like only the regular homepath mortgage (without renovations)is available. I would like to purchase a second home, but the home I’m interested in shows only the logo for the renovation program and states only owner occupied.
Chrissy,
The homepath program is available for investors. It however is not a renovation loan program, they will not pay for renovations to be financed into the home. The down payment requirement for an investor is 10% down and they waive the mortgage insurance requirement. Also, if the home is being purchased as a 2nd home, it also requires 10% down.
Hello,
I have a question about the 6% seller concessions for HomePath properties.
We are preparing to make an offer on a Fannie Mae property that is HomePath eligible. This will be our primary residence and we are first time homebuyers.
Neither our buyer’s agent or loan officer is familiar with the program and both were surprised when I told them that I had read on various websites that I could request up to 6% toward closing costs.
Is this fairly standard as a request? Does Fannie Mae usually agree to these? Does it depend on the property value/price? I’ve heard the $5000 amount thrown around and am wondering if that is the maximum amount? The offer I plan to make is $200,000 and the property needs no real work, so it won’t be a renovation loan.
Thanks for any clarification you can provide!
Sincerely,
Kelly
Kelly,
Let me try to help with any clarification I can give.
Both the Fannie Mae Home Path program and FHA both allow a seller to contribute 6% toward the buyers closing costs and pre-paid expenses. Depending on your market you can ask for closing costs to be negotiated into the offer in your contract. So in your case, since the purchase price is $200,000.00 you could ask for up to $12,000.00 for closing costs. Remember both the Fannie Mae Home Path program and FHA will allow this with their financing. Also, please note by my example in the post, that most of the time FHA will be the cheaper option for the home buyer if it is your primary residence. This is because the home path rate is not as competitive as FHA rates. You also asked further if asking for closing costs to be paid by seller/bank is a standard request. That really just depends on the situation. In our real estate market here in Phoenix it is very common for buyers to ask for closing costs to be paid for by the seller, but this can vary from market to market. Also, it also depends on other factors such as how long this home has been on the market and is the seller getting mutiple offers on the property. I have always found that a buyer can always ask, the worst thing is the seller rejects your offer. I would lean on your real estate agent for advice on this.
If you have further questions, I will be available today at (480) 251-0002 for questions.
Hi,
My question is, can I buy a Fannie Mae property with FHA loan? I am interesting ina Fannie Mae property, however I am approved for a FHA loan. I am confused about it.
In advance, Thank you for your time and your help.
Mia,
You can use FHA financing on a Fannie Mae property. Some of the Fannie Mae properties are also set up through Fannie Mae to use Homepath financing. Either one is acceptable.
Thank you again for your comment.
Hello,
We are first time buyers that have special circumstances. We only have enough for 3.5% for down. We are approved and are in the process of purchacing a Fannie Mae HomePath home. We are useing a NSP fund program that is giving us enough money in a 5 yr forgivable second to come up with an amount around 30% down (with our 3.5% added). We have a credit score of 811. So credit is not an issue. We would like to get the best deal. My loan officer is pushing the FHA, but Im not so sure the HomePath would’nt be better. We are limited on options due to a lot of loans not likeing forgivable silent seconds. If we are going to have all this $ in the home after 5 yrs (when the second -NSP money- forgives itself) we are going to have to refinance to get the 2nd insurance removed. We are thinking that if we refinance then we will owe all that $, and we will loose the great low rates we will have locked in. We are planning this home to be a ten year, and would like to not have to deal with anything like refinancing durring that time. What do you think? Is it still worth it to do the FHA? I’m affrid doing the FHA will cause us to loose money having to refinance in 5 years. Please help. We are in a position to bennifit our family greatly and I don’t want to mess it up.
Kimberly,
Normally I can answer someones question pretty straight forward, but in your case, it is hard to advise you on the best decision when I do not know really any of your specifics. Also it is common for silent 2nd mortgages to have issues with the 1st mortgage financed. If your current lender is trustworthy and not trying to steer you wrong, then I would take his advice. But again each borrower’s situation is very unique. I do want to make it clear that you do want to take advantage of the low rates. Who knows if 5 year or 10 years interest rates will ever be this cheap.
My mom and I are purchasing a HomePath home and we are currently going through the mortgage process. She lives 170 or so miles from the property, but plans to commute until she transfers to a closer office or retires. They are requesting that a LOX be prepared by her employer explaining how she will be able to handle her day-to-day duties while living 170 miles away and also they want her employer to provide them with a local employment address that is closer to the home. The second part isn’t going to happen since she plans on commuting. What is the best way to go about getting this requirement satisfied, and do you think it will be a dealbreaker? In this economy, jobs are pretty scarce and more people are probably commuting to work. I understand that they are probably afraid she is lying and will quit work after getting the loan, but we are having a hard time understanding exactly how to give them what they need.
Dear Tonya,
I have had this situation come up before and let me share what I know. Underwriters and investors are not understanding why your mother would travel 170 miles each way, which is about a 3 hour commute each way back and forth to work each day. So requiring a letter of explanation is a normal logical requirement. As a loan officer, I would also question this because it is not logical. An underwriter has no way or knowing if your mother is being truthful or not. All an underwriter can do is make a judgement call that your mother is being truthful about her situation based on the evidence presented. You also stated that she plans to commute until she transfers or retires, so an underwriter asking for a location of a employment address closer to her home for verification purposes is again normal and necessary. Now you state that the 2nd part isn’t going to happen, but without this an underwriter has no way of knowing if a closer office truly exists. Understand the underwriters point of view, your mother is asking the bank to believe that she is going to travel 170 miles each way to work. If they are going to believe this, they need some evidence to back up your mother’s claims. I think the best way to get this condition satisfied is to be honest and forthcoming with the bank. Provide them the information about the closer office, provide them the letter of explanation. I do feel that this would be a deal-breaker with just about any lender out there based on the way you are trying to structure the loan. Before I responded, I personally called my head underwriter and went over your situation. He stated that he usually can get the end investor to sign off on a file when the commute is less than 90 miles each way. Further than that, he states that the story starts to sound not believable even if it is. They are 100% afraid that she is lying and this is why they are making it difficult. If I did this loan for you, I would run into the same situation most likely. Now I pose the question of why your mother does not treat this as a 2nd home and put 10% down. That would be more believable to the underwriter to get the file approved. No one is calling your mother a liar, they are just trying to back up her claims with the evidence given. I wish you the best.
I have been living in a rental unit with our younger children for almost a year in FL because they are in a special school here. My husband telecommutes most of the time, but he lives in NJ where his company is some of the time, and some of the time in FL with the rest of us. We were told by our mortgage broker that we were eligible for a Homepath mortgage as a second home with 10% down, even though I live here full time, because my income is from my husband’s company in NJ. We made an offer on a place with 10% down as instructed, and it came back with a counter offer saying we must “Accept the following terms and conditions” one of which is, “Buyer acknowledges the Buyer will occupy this property as the primary residence pursuant to Fannie Mae First Look Initiative.” We have searched their website, and it never uses the term “primary residence” when discussing Homepath and First Look (which is only for “owner occupied” exclusively for the first 15 days of mls listing). The property would be owner occupied. We do not plan to use it for investment. We only have 24 hours to respond. Can you give us any advice about answering the offer? Thank you.
Dear Diana,
I cannot give you advice on this, because this is not a finance issue, but a contract issue. You must discuss this with your real estate agent. Now let me try to share what I can to be helpful. I have never heard of the Fannie Mae First Look Initiative, so why the seller is countering your offer I am not sure. Now, you have the right as a buyer to make it clear to your agent that you need to go homepath and that is final. You and your husband have the right to choose your financing, this is not a seller choice, but your one, they (the seller) cannot force you to change your financing, now if they choose not to accept the offer, then shame on them. You also cannot agree to this Fannie Mae First Look because then you and your husband would be possibly be committing loan fraud for stating that you would be owner occupying the property, which cannot be backed up on your loan approval based on your husband’s telecommute issues. If I was in your situation, I would counter back that you must finance using homepath and that is final. If you do not get the home, then it was not meant to be, but at least you were being honest. If a seller is this ignorant that they know your finance options for you better than yourself and will not agree, then you need to let it go and find another property with a seller that is more willing to work with you. I see this type of behavior from seller/fannie mae all the time. You just need to hold your ground. Good Luck, I wish you the best.
Thanks Gary. We decided to explain our circumstances and are now waiting for a reply. The property would be owner occupied but not considered our primary residence, but Homepath allows second homes with a higher down payment which we are offering. The First Look program excludes investors for the first 15 days to give owner occupants a chance to buy, but Fannie Mae’s literature never mentions “primary residence” (that term is only used in our counter offer). Their definition of investor does not apply to us, so we do not know if we are excluded. As you said, if it is meant to be it will happen.
Our offer was accepted today. Thanks for your help.
Dear Diana,
I am so glad to hear your offer got accepted. Holding your ground was the right thing to do and it worked out. Congratulations!
Hi Gary,
My husband and I made an offer on a Foreclosure. We are using a mortgage broker and were planning on using an FHA loan. We have enough funds to put down 10% if needed. The house needs some minor repairs (possibly septic, heating). The listing agent is pushing Homepath Renovation financing. Our agent seems to have no opinion. We’re not sure what’s best. Our credit scores are very good. The Homepath rate I was quoted is at least 1 point higher than the FHA. Can you advise why the listing agent is pushing this? They haven’t accepted our offer and we think it is due to this issue. We appreciate any insight you can provide. Thanks!
Dear Ellie,
Most real estate agents push a product based on simplicity of closing and not what could be the best for the client. Personally I would not take mortgage advice from a real estate professional, but get your advice from your mortgage broker. FHA does have a renovation loan as well called a FHA 203K loan. This might be a better option. Please understand that you are in control of your mortgage decision. It is not your real estate agent’s. Good luck, hope this information helps. Also dollar for dollar the FHA loan will be your cheaper option.
Thanks Gary,
Our broker did advise of the 203K and that is what we were investigating. Thank you for your advice.
You are Welcome. Good luck, and if you need my advice of assistance further, please do not hesitate to contact me again.
Can you please provide a rough estimate on how much higher HomePath interest rates are vs FHA vs Conventional? And are rates even higher if doing the renovation loan? Are we talking +/- 1.000%, or are they really hitting you hard with +/- 3.000%-4.000%++ ?
Many thanks in advance,
Amanda
Rates are about 7/8% to 1% higher on the homepath product compared to an FHA loan for a primary residence. The costs equal out because you have to charge more upfront origination cost on homepath, but they do not have the built in upfront FHA insurance. I just analyzed a borrower yesterday going FHA putting the 3.5% down vs. homepath’s 3% and the FHA loan was a far superior product for the primary residence. Again I really like homepath, but it is a niche product based on certain criteria and situations.
Dear Gary,
Is there ever a time where the down payment for Home Path is 5%? This is for firt time home buyer. Is the mortgage insurance always $3500 with FHA? Home path appears to be a better option because the money you bring to the table minus the closing cost goes towards the loan amount and not the seemingly high mortgage insurance.
I recently purchased a homepath home with 3% down with myself as primary residence. For medical reasons, I am going to have to leave the area my home is in for a indefinite amount of time. I understand that to buy the home for rental purposes is fraud under this program. What is the period of time I have to actually live in the home before I can rent it out while I am gone?
Dear Tavaris,
First of all, FHA just changed the upfront insurance on October 4, 2010 to 1% upfront and a higher monthly mortgage insurance. But even with these changes, FHA is still a cheaper option on the monthly payment.
Dear Lisa,
This is a very good question. Let me answer it but first state that I am not an attorney, so my answer is for guidance only. If at the time you applied for the mortgage your intent was to live in the home and you did that but later your situation changed due to medical reasons and now you have to rent it out, then you did nothing wrong in the case of loan fraud. It is a borrowers responsibility to be honest and forthcoming on a mortgage loan application when it was taken upfront. If your circumstances change at a later point in time after this loan closed, then you did nothing wrong. Life is what happened, not loan fraud. However, if you knew about this medical issue at the time you applied and never disclosed this fact upfront, then loan fraud on your part was committed. Beyond that I cannot give you more advice due to the legal aspects of your question.
I’m currently looking for a home. My real estate agent has been pressing this homepath thing pretty hard, and pretty much only showing me homepath eligable properties. She says that I would be better off because I can save more money.
I found a house that I’m interested in and it happens to be homepath. She said that I would need to put 7% down. From what I’ve seen this program starts at 3% down and from what you said, will actually cost more money. My credit score is in the low 700s.
Why would she recommend 7% down? What circumstances would a homepath loan for an owner occupied property be more beneficial than an FHA loan?
Thanks.
Lawrence,
Thanks for the comment, First of all let me make it clear that your real estate agent is not a licensed loan originator, so her advice could be off even though she might feel it is better. My experience with Homepath vs. FHA at 3.5% down is that you have to run the actual numbers on each individual client to figure out which way is the best, but 95% of the time FHA ends up being a much better option. Also, Homepath does have options with only 3% down, so I have no idea why she is stating 7% down. Have you talked this over with a loan officer already, beside me? If not, please call me depending on where you live, I might be able to help or get you to a licensed loan originator who can. If your credit score is in the low 700′s, then homepath and fha might be pretty close, but fha has a lot of in direct benefits that clients are now always made aware of. Again, I am not sure why she would recommend a 7% down option when homepath clearly has a 3% down option and a 5% down option. FHA has a 3.5% down option and once the math is run, can be a much cheaper option. Last, Homepath can be more beneficial with some short term benefits such as stayin in the home for less than 3-5 years. Homepath is much more beneficial when it is used a 2nd home loan or an investment loan, which is allowed. On a primary home is can just depend.
Hi,
I am interested on a Homepath house but I am aproved for an FHA loan, I did not qualified for Homepath financing because of my credit is a little lower. Now my broker says I cannot make an offer to the house because of this. Is this true? They will not accept an FHA loan?
Dear Sharlim,
This is NOT true. Fannie Mae offers certain homes on the market with special financing called HomePath. You can always put your offer in with FHA financing.
I currently had my offer accepted for a homepath home last week. I have to switch from homepath financing to fha, and they are also taking more than a week to send over the signed contract. My question is how long do they usually take to send over the contract because the house is still listed as active even though they already accepted my offer and would it be a problem that i have to swithch to fha financing?
Dear Claudia,
Great Question, let me try and advise you on this. I have seen banks on Homepath deals take about 3-14 days to send back over the signed contract. Most banks are so swamped with foreclosures that the asset manager in charge of getting this contract re-executed are backed up. So patience will help in this manner. Your financing issue should not be a problem.
We are looking into buying a house that we can fix up and live in for 10+ years. We have been looking at the home path homes just for the sake that they allow you to draw a loan larger in order to do improvements on the home. I was just curious if the fha-203k loan is as good or better than the homepath renovation loan?
Thanks,
JOEY
Dear Joey,
I would not say that the home path renovation loan is any better than the FHA 203K. They both are very difficult products to work with. What you need to find out is what the fees, interest rate and closing times will be for each product.
Gary,
My wife and I have found a home that is a Fannie Mae listing. We love the house!!! We would like to make the strongest offer possible. We were advised that the Homepath loan looks more favorable than the FHA loan program. Also, we we’re told that it adds more to the bottom line total of the house and the asset manager in charge would take special consideration because of it. Is this true?
Also, you talk about FHA being cheaper than the Homepath loan, but after my lender ran the numbers for Homepath, our monthly payments were actually cheaper. Is this due in large part that we would stop paying the mortgage insurance at some point in the FHA loan program and our monthly payment will eventually be lower with FHA, but not immediately?
We’re perplexed and don’t want make the wrong decision, but we want this house!!!
Please advise.
Thank you so much,
Jav
Dear Jav,
Sorry for taking a couple of days to get back with you. I was not available. First let me share that this original post was written back in August 2009. Since then FHA has gone through many changes to their monthly mortgage insurance cost. So at the time the original article was written, FHA was a much superior product. Now fast forward to the present and that benefit is not as great as in the past. Also soon in April 18, 2011 of this year, FHA is going to have another monthly mortgage insurance increase. So you are probably correct that the payment on homepath today is more attractive, but remember, you must also look at all the pieces of the loan here. You want to make sure to do a straight comparison of costs and interest rates from FHA to Homepath. Most of the time FHA is still offering a much more competitive rate and cheaper closing cost structure. Also you are correct that you do NOT pay for FHA insurance forever. This plays into the long term benefit costs. Do an apples to apples comparison of the cost, the APR, and note rate. Also figure how long you would pay for FHA insurance versus not paying on homepath and figure when in the future you would make this up. Based on how long you might own the home will also have a huge factor into the decision. Most likely if you are going to be in this house for 5 years or less, Homepath might be more beneficial, but over a longer time frame, FHA might be the better option.
Hi Gary,
thanks for all the answers to peoples question. Here is my situation. My wife and I are looking into getting a home. We went to an FHA loan originator and was told that the loan would be in my wives name only because of foreclosure on my credit and other delinquency from previous marriage. My wive has since lost her job and is collecting unemployment. My income now is sufficient to pay the mortgage etc. Can we qualify for either a FHA or Homepath financing using her credit and my income? Her credit score is in the high 600 while mine is in the high 500.
thanks
Ken
Dear Ken,
Let me try to answer your questions. First of all FHA loans are community property based, so if even if you are not going to be on the loan, all your debts and your wife’s debts would have to be considered. Since she is out of an income source, FHA is not going to work. Also, Homepath requires a minimum credit score of 660. Since yours is below that score, and only you have income, you would be the one to have to qualify for homepath, but your credit score does not meet the criteria. So right now based on your situation, you would not qualify for either FHA or Homepath. My best advice would be to work on improving your credit and wait until your wife is back working. This will then give you the best chance of getting a loan approval. Hope that answers your question.
Sincerely, Gary Miljour
My wife and I have found a condo that lists cash and conventional loans only, but then lists homepath for as little as 3% down. We don’t really have any repairs to do on the condo and it is fairly new (2005). If it qualifies for homepath does it also qualify for FHA? The condo is listed for $67K and we don’t need repairs. I have heard horror stories of getting forced into a loan 20-30K higher for repairs that aren’t necessary. Have you ever heard of that? We just want to use homepath because we can’t afford 10% for a conventional loan and it doesn’t list FHA but I don’t need repairs added onto it. Any info is appreciated, thank you!
Dear Bill,
I think I can answer your question for you. Most Condo communities are just not set up FHA approved, so a lot of agents list homes for sale without FHA financing because they just cannot get it on that condo community. So I am making the assumption that the property (condo community) is NOT qualified for FHA financing. Homepath, is basically a conventional loan with Fannie Mae but only requires either 3% or 5% down. You should be able to submit your offer and go with the Homepath Financing with 3% down. If you are already pre-qualified, please talk with your lender about switching it to Homepath. If he/she does not know how to do homepath financing, you will need to seek out a more qualified loan officer. If the property is in AZ, I can help you, otherwise I could refer you another lender in other states through a network a highly recommended loan officers that do know how to finance homepath. Now you also mention repairs. If the property is move-in ready and does not need repairs to make the home habitable then you should not need to get repairs done. If the home is Not habitable, then homepath does offer what is called homepath renovation which is when you finance the base loan amount+ repairs up to a certain dollar figure. Based on what you have shared, it sounds like the home is habitable, so this should not be an issue. My advice again go homepath because you cannot get FHA and seek out a lender who knows how to do your loan.
Wow, thanks for the quick response. I am in MI but I have spoken with a lender that claims to be able to do homepath loans. I will try to get an estimate in closing costs and monthly payment so I know what I’m looking at before saying yes. Thanks again!
My husband and I are planning to relocate within the next few months. Ideally, we would like to purchase a home before we arrive. From what I understand, this is an option as long as we have contracts with our future employers stating that our income will remain the same or increase (we will both be continuing in our current line of work). Although I completely agree with the reasoning behind the income verification, we are hesitant to accept any job offers until we have a definitive residence, placing us into a bit of a ‘catch-22′. Additionally, this home will be our primary residence, but we are unsure as to the length of time it will take between closing, securing employment and occupying the home. We have gone back and forth between FHA and HomePath, but we are still unable to identify which product suits our situation best. Down payment and mortgage payment are not an issue. Any recommendations? Thank you, in advance.
Dear Holly,
If you are down to picking the right product, my advice is that FHA still has a lot of benefits over homepath. So if either loan can be used, I would recommend FHA. Also if you are looking at minimum down payments.
Could you recommend loan officer for Fort Walton Beach FL for homeloan program to buy condo?
I know only one reliable Loan Originator in Florida and that is Gerry Suarez Jr . I linked his information.
Gary,
Thank you for sharing wonderful information. My wife and I are planning to purchase 2nd home to rent it out. Our credit is 800+, we try to put minimum down payment. My questions: 1. What is the difference between investor and 2nd home buyer? What is the advantage of claiming to be a 2nd home buyer, instead of being a investor? 2. How to find homepath eligable properties?
Thank you again,
Daivd
Dear David,
The difference between a 2nd home and an investment is that an investment loan is when you are planning to rent the property out to tenants. a 2nd home loan is when you already own a primary home and you want to buy a 2nd home to live in for part of a 12 month calendar usually 6 months out of the year. Based on what you are stating, you would have to classify the loan as an investment loan, otherwise you would be committing loan fraud. If you have no intentions of living in the property, then you must use an investment loan. The best way to find homepath eligible properties would be to hire a realtor that can show you all the homepath home inventory. They also have a website. Its. http://www.homepath.com
Gary,
Thanks for all your insight. This forum has answered a lot of my questions. My husband and I are looking into a Fannie Mae foreclosed property in Missouri. It is listed on the HomePath website and states “HomePath Financing: This property is eligible for HomePath Renovation Mortgage only.” I have done quite an extensive amount of research online in regards to financing, short of actually calling a lender. I am afraid that the limit of 35K with the “HomePath” is not going to be suitable for the repairs that are needed because of termite damage and possibly water drainage issues. (It’s an earth contact home.) The word “only” scares me; if this home qualifies for the “HomePath” financing would it be safe to say that it would qualify for the “203K Standard” as well?
Thanks Again,
Amy
I currently live in NYC and would like to purchase a home in Jersey City NJ. Could you recommend a loan officer please? Should the loan officer be in NY or NJ? I am new to home purchasing & know very little. Also, as my credit score is right below 700, and Fannie Mae has this offer http://www.homepath.com/incentive/index.html ,which is best for me FHA or Fannie? Thank you very much for all your time and help, Le’lani