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 
Dear Amy,
The word “only” also scares me. Understand that if a house is listed as a homepath renovation, they cannot dictate the financing options. However, the Real Estate agent that put the listing out there was probably making it clear that having funds built in for a renovation budget would be the only way to make a loan work. Here is the other issue, FHA 203k loan (fha’s renovation loan) and Home Path Renovation are almost identical in the amount of repairs you can finance into the loan. So if you do not think 35K will work, then this home might not work out for you. The other option would be to try and find a local lender in your area that could provide a true construction loan. However these are very difficult to come by these days.
Dear Lelani,
I would recommend you work with Jeff Belonger. He is a licensed Loan Officer in the State of New Jersey and has over 20 years experience. I am only licensed in Arizona and soon to be licensed in California. I have referred a couple of clients to him and they were very satisfied with his services.
This is a great resource, thanks Gary. This isn’t strictly a financing question, but thought you may be able to help. We are currently under contract with a Fannie Mae home (using an FHA loan). The agreement date on the contract was 7/21, and the settlement date was listed as 8/26. When the bank’s plumber dewinterized the property on 7/21, he messed up and caused a leak that I was told would be fixed. Its been almost 4 weeks now, and all I’ve been told is that the bid is waiting for approval. I havent been able to get an inspection, and FHA hasn’t appraised yet. There’s no way we make 8/26, and no one from the listing agent, to the asset manager to Fannie Mae will give me any details on the status on the repairs. Any tips on who to contact to try to track down the people in charge of the repair approval? Also, re: the appraisal, how strict is FHA in their appraisals? The place needs work, but it is livable as-is and is assessed for 20% greater than the sale price. thanks!
Dear Bill,
Thanks for the nice comments,
Let me try and answer your questions. This sounds like a real estate agent issue. If you have buyers representation for a real estate agent, they should be able to help you make sure these repairs are done. If you did not hire a real estate agent, the listing agents first obligation would be to the seller first most likely. So this could be why you are not getting a quick response. Also, most real estate contracts give you the right to back out if repairs are not being or going to be performed. As for FHA appraisals. They are only as strict as the FHA guidelines themselves. If the house meets FHA condition guidelines, then you have nothing to fear. Again this should have been explained by either your real estate agent, lender or both. So if you put an offer in a home that does not meet basic FHA housing condition, then most likely the appraiser will come back and require certain repairs items to be done to cure the condition to FHA standards. If the seller is not willing to fix the home to FHA standards, then most likely your financing will fall apart. Again, this all should have been explained to you upfront.
I live in florida and i am interestedin a homepath home. I am FHA and VA approved. Can you answer the following questions before i go any furthre in the home buying process?
If I use FHA with H2H funding, can I split the funds to cover closing cost and down payment assistance?
If the home is a Fannie Mae home offering 3.5% closing assistance, and I want to use VA which normally requires no down payment, can I still use H2H funding to reduce the cost of the home?
If I use the VA with no down payment can I use H2H funds to cover closing cost?
One of the benefits of purchasing a Fannie Mae home is “no mortgage insurance”. How is that possible, I thought it was a requirement? Are they waiving the cost to the buyer as an incentive? VA has no PMI cost, if I purchase this home using VA does this mean I will have no mortgage insurance with Fannie Mae and no PMI insurance cost with VA?
This home is a “Home Path Renovation Mortgage”; can you please explain what this is and how it is used?
What are seller credits? How do they benefit the buyer?
Dear Chicken Salad,
Let me try and answer your questions,
First of all, I am not familiar with H2H. I just searched that out, and it sounds like it is some special gift program for Florida. I am licensed in AZ and soon to be licensed in CA and they do not have that out here. I would check with your lender or I can refer you one in Florida that I personally know and trust. So I am not sure if funds can be split to cover closing costs and payment assistance. I do know VA loans allow a seller to pay up to 4% toward your closing costs and prepaid expenses and FHA loans allow a seller to pay up to 6% toward closing costs and prepaid expenses.
Again, if you go VA, I am not sure if H2H will allow you to use those funds in conjunction with a VA loan for down payment.
Again, I am not sure if VA guidelines allow you to use H2H funds for closing costs.
Fannie Mae allows no Mortgage Insurance, because they have made a business decision to take on the risk. It is possible, because they make the rules. Yes, they are waiving the cost to the buyer as an incentive to move some of their home inventory. Yes, if you go Fannie Mae homepath or VA, both loans have no monthly mortgage insurance cost, but VA loans do have an upfront VA funding fee which is financed into the loan. The homepath loan does not, but typically the interest rate is slightly higher. You need to have your lender breakdown the monthly payment options to see which option will be the cheapest payment.
A Home Path Renovation Mortgage allows certain repairs to the property to be financed into the the new loan.
Seller credits is funds that the seller is giving to you (the home buyer) to help pay for your mortgage closing costs and prepaid expenses. They benefit you because this is less out of pocket money you will have to bring into closing.
I hope this helped, again disclosure: I am not familiar at all with H2H, and if you need help, either talk with the lender that pre-approved you or let me know and send me an email and I will refer that other Florida lender to you that I personally know and trust. He is very up to date on the latest and greatest with mortgage products in Florida.
Gary,
My husband and I have been out of the housing market for the past 5 years because the home we are in now is paid off. We have recently been looking at buying a home for our daughter. We know that her credit is in the low to mid 500′s preventing her from ever quailifing for a morgage loan. I believe that most of the past credit woes are things that might be able to be taken care of thus rasing her score but not sure how long this proceedure takes or even how to go about it. Our first thought was to buy a place for her. We have found some homes in our area listed through the Home Path Renovation Program but have been told if we buy a home and put our daughter in it we are now considered investors. Is this true and are there any other alternatives out there for us? We would prefer not to put any more down than 10%. This maybe unresonable thinking but like I said we have been out of the market for some time. Any suggestion would be appreciated.
Dear Melinda,
Let me try and answer your questions. If your daughters credit is in the mid 500′s, then the lenders that approve the Homepath loan would require a much higher credit score for her to qualify. Even if you co-sign for your daughter, the banks today require that she qualifies on her own credit merit. Our banks require a minimum of 660 credit score for homepath if the down payment is less than 20% down. Otherwise your daughter would need a 620 score of higher with 20% down. Since your daughter might not qualify, and you still want to help her into home, then you would have to purchase it as an investment property. Homepath only requires 10% down on an investment home as long as your credit is above 660. The only alternative for your daughter would be to look into FHA financing which in most areas is more loose on the credit score requirements. We can go as low as 620 in most cases for FHA loans. Hope this answers your questions.