Renovation Loan Program: Is The Homepath Option Still Available?

Fannie Mae's HomePath Renovation Mortgage program is designed to help homebuyers finance the purchase of foreclosed properties and the cost of repairs and renovations. The program offers a range of benefits, including a low down payment, flexible mortgage terms, and no mortgage insurance. With a small down payment and no mortgage insurance, the HomePath Renovation loan is a good option for those looking to buy and fix up a property with a single loan. However, it is important to note that not all lenders are approved or specialize in these loan types. So, does the HomePath Renovation loan program still exist?

Fannie Mae's HomePath Renovation Mortgage

The major difference between a standard Homepath Mortgage and a Homepath Renovation Mortgage is that the latter allows the buyer to finance the purchase of a Fannie Mae foreclosed property and the cost of repairs and renovations. When using a Homepath Renovation loan, the cost of repairs and renovations are added to the cost/price of the home to determine the buyer's total cost. A Homepath Renovation mortgage is available for owner-occupied use, rental properties, and second homes.

The HomePath Renovation Program is specifically for borrowers purchasing a Fannie Mae-owned property and also needing to fund moderate renovation. Financing will fund both the purchase and renovation of the home. Renovation funds are held in escrow until the renovations are complete. Low down payment and flexible mortgage terms are applicable. No mortgage insurance is required. Renovation costs are limited to 35% of the 'as repaired' value or $35,000, whichever is less.

To find eligible properties, search on HomePath.com. Any home with the HomePath Renovation logo is eligible for the program. The minimum credit score for this program is 660 for loans with a down payment of 20 percent or less and 620 for borrowers with more than 20 percent down.

Low down payment

The HomePath Renovation loan program is a type of mortgage that allows buyers to finance the purchase of a Fannie Mae-owned foreclosed property and the cost of repairs and renovations to be made to the property. This loan program is specifically designed for homes in sub-par condition, enabling borrowers to buy the home and get it off Fannie Mae's books of foreclosed homes.

One of the key features of the HomePath Renovation loan program is its low down payment requirement. While the specific amount may vary depending on the property and the borrower's circumstances, the program generally allows for a low down payment, making it more accessible to buyers who may not have a large sum of cash available for a down payment.

The down payment for a HomePath Renovation loan is typically as little as 5% of the total cost of the property plus the improvement costs. For example, if the purchase price of a home is $200,000 and the renovation costs are expected to be $25,000, the required down payment would be $11,250 (5% of $225,000). This low down payment option makes the program attractive to buyers who may not have a substantial amount of cash available for a down payment but are willing to take on the challenge of renovating a foreclosed property.

It is important to note that the down payment requirements for HomePath Renovation loans have changed over time. Before November 16, 2013, the required down payment was only 3%, but it was increased to 5% after that date. Additionally, there may be other factors that influence the down payment amount, such as the borrower's credit score and income. Borrowers with a higher credit score and stable income may have more favourable down payment options.

Furthermore, it is worth mentioning that while the HomePath Renovation loan program offers a low down payment option, there are also other costs and requirements associated with the loan. For instance, renovation costs are limited to 35% of the 'as repaired' value or $35,000, whichever is less. Additionally, the loan program may have specific eligibility criteria, such as the requirement for the borrower to be "foreclosure-free" for the previous seven years. Therefore, it is essential for prospective borrowers to carefully review the terms and conditions of the loan program and consult with a qualified lender to determine their eligibility and understand the full financial commitment involved.

No mortgage insurance

The HomePath Renovation loan is a type of mortgage that allows buyers to finance the purchase of a Fannie Mae foreclosed property and the cost of repairs and renovations to be made to the property. The loan is available for owner-occupied use, rental properties, and second homes. The major advantage of the HomePath Renovation loan is that it only requires a small down payment, typically 5% of the purchase price plus improvement costs, and does not require mortgage insurance. This is in contrast to other types of loans, such as FHA loans, which typically require mortgage insurance.

The HomePath Renovation loan is designed for homes in sub-par condition, enabling borrowers to buy a home that may not be eligible for other financing options due to its poor state. The loan allows borrowers to finance both the purchase of the home and the necessary renovations with a single mortgage. The down payment for a HomePath Renovation loan is significantly lower than that of a traditional mortgage, making it a more accessible option for those looking to purchase and renovate a foreclosed property.

Another benefit of the HomePath Renovation loan is that it offers flexible mortgage terms. Renovation funds are held in escrow until the renovations are complete, ensuring that the funds are used for their intended purpose. The loan also provides a streamlined process for borrowers, with pre-qualification based on full income, asset, and credit documentation. Once a property is found, the buyer submits requested repairs to the lender through contractor bids, and the lender orders an appraisal to determine the future "as completed" value of the home.

It is important to note that the HomePath Renovation loan has specific eligibility requirements. The program is designed for borrowers purchasing a Fannie Mae-owned property and funding moderate renovations. Properties eligible for the HomePath Renovation program will be clearly marked with the HomePath Renovation logo on HomePath.com. Additionally, homes must have a sound foundation to be eligible for the program, as foundation repair is not covered.

Overall, the HomePath Renovation loan provides a unique opportunity for buyers looking to purchase and renovate a foreclosed property. With a low down payment, no mortgage insurance, and flexible terms, it offers a convenient and accessible option for those seeking to improve and occupy a previously foreclosed home.

Financing for repairs and renovations

The HomePath Renovation loan is available for owner-occupied use, rental properties, and second homes. The down payment can be as little as 5% of the purchase price plus improvement costs. For instance, if the purchase price is $200,000 and the construction will cost $25,000, the required down payment would be $11,250 (5% of $225,000). The minimum credit score for this program is 660 for loans with a down payment of 20% or less and 620 for borrowers with more than 20% down.

The HomePath Renovation loan process is slightly different from other loans. Once a property is found, the buyer submits requested repairs to the lender via one or multiple contractor bids. The lender then orders an appraisal, and the appraiser determines the future "as completed" value of the home, factoring in the requested modifications from the contractor's bid. It is important to note that homes must have a sound foundation to be eligible for the HomePath Renovation program, and renovation costs are limited to 35% of the "as repaired" value or $35,000, whichever is less.

While the HomePath Renovation loan is a great option, it may not be suitable for everyone. In such cases, alternative options such as the FHA 203k loan, a USDA loan, or a VA loan may be considered. These loans have their own advantages, such as lower down payment requirements or the ability to purchase a move-in-ready property.

Available for owner-occupied use, rental properties, and second homes

The HomePath Renovation loan is available for owner-occupied use, rental properties, and second homes. This means that the property can be purchased as a primary residence, an investment property, or even a second home.

For owner-occupied buyers, the down payment can be as low as 5% of the total cost of the purchase price plus improvement costs. For instance, if the purchase price is $200,000 and the construction will cost $25,000, the required down payment would be $11,250 (5% of $225,000).

For investors, the minimum down payment is 3.5%, which is only 0.5% more than a HomePath Mortgage. If the property needs improvements, investors can utilize the FHA 203K loan option.

The HomePath Renovation loan is designed for light to moderate renovations, which allow the borrower to live in the property while the renovations are completed. These repairs will be identified in the appraisal, including any cosmetic repairs identified by the buyer.

The HomePath Renovation loan is a great option for those looking to buy a smaller starter home or those working with a limited budget. It is also ideal for those looking to buy and improve a foreclosed home, as it was created specifically for homes in sub-par condition.

Frequently asked questions