Earlier in the month, I discussed the new Fannie Mae mortgage loan program, HomePath: no mortgage insurance, no appraisal, low down payments, and contributions up to 6% of the purchase price. Now that the program has been running for a couple weeks, I am going to reveal what I have found to be true about this program.
Let’s begin with the issue on credit score. The advertising that I am seeing is that this program is available for people with credit score as low as 580. True… at 580 a borrower does qualify for the program, but only at 80% loan-to-value. To get the 95-97% loan-to-value, the mid-score must be at a minimum of 660. Now, before someone tries to argue this, yes 95% combined loan-to-value is available for a 580 credit score. Problem… unless the seller is willing to do a 2nd mortgage for the 15% or you can get a grant/aid (IE S.H.I.P.) to help cover that difference, then you are just plain out of luck. Sorry, but the lender will not budge. It is all or nothing.
Now, on to the closing costs concession. The program allows for up to 6% of the purchase price to be given by the seller towards closing costs and pre-pays. This means that you have to convince FNMA to give up money to help you get into the home. GREAT NEWS!!! So far, I have seen FNMA consistently give $5000 to help. In one case, this was over the 6%, so we had to cut the concession back. In most cases, the $5000 has covered all the closing costs leaving the buyer to just bring money for their down payment.
The no appraisal feature has been getting mixed reviews. Some critics to the program are saying that this is bad because the homeowner does not know what the home is really worth. In fact, they are claiming that the home is already overpriced and that is why they are willing to give the concession towards closing costs. In my honest opinion, good for FNMA if they can sell the home at a slightly higher value. My reasoning is that this is their way to stall declining housing prices. If they can sell at least three of these homes in a neighborhood, then they have set the bar for new comparisons. Those that were below this bar are now under valued and will either sell faster or raise their prices in hopes of getting the new higher price.
HomePath is available to not just home buyers, but also investors and those looking to purchase a second home. Again, good for FNMA. They are doing what they can to stimulate the housing market by offering a program to all potential buyers with a program that requires little down, low monthly payments, and the elimination of potential deal killers (closing costs and appraisals). What FNMA is doing right is that the borrower HAS to QUALIFY!!! They are very strict on the guidelines when it comes to the individual borrower. As I pointed out earlier, the credit score is a big one.
What makes a qualified borrower? The basics: good credit, good income, low to moderate debt. The mysterious black box of FNMA’s Desktop Underwriter holds the answers to what QUALIFIED really is. With all the tightening of guidelines and President Obama’s Homeowner’s Affordability and Stability Plan, borrowers that qualify are those that historically can pay their mortgages.
And before I forget, double-wide mobile homes are eligible for this program (provided they are on the HomePath website). And should you be looking at a home that is worth more than the conforming limits of $417,000, FNMA does allow for financing through their High Balance product line.