There are lots of benefits to the HomePath loan (like the 3.5% closing costs credit for owner occupied properties currently offered, no mortgage insurance is a definite plus and the ability to purchase as an investor with only 10% down is killer). However, the downside of having to purchase a specific FannieMae Home severely limits the potential for a prospective home buyer. I would recommend buying a HomePath home if a client wanted to buy THAT specific home anyway (investor, different story...there may be reasons to shop for a HomePath property).
If a borrower is interested in upgrading a property, I much prefer the FHA 203K loan. Of course, the deferred maintainence and defects must be corrected just as with the HomePath Renovation Loan; however, the borrower has much, much more latitude with what improvements they can make to the property. With the exception of luxury items (no new swimming pools), the sky is pretty much the limit. As long as the project "pencils" to no more than 110% of the future value of the property, the borrower can call many of their own shots.
On the 203K loan: Interview and report by FHA consultant preceded contractor. Contractor bid next. Third, appraisal "as is" and as "future value" adding FHA consultant report and contract plans and specs. Any questions, please feel free to contact me. I specialize in the 203K and have written several blogs about the product and opportunities. Best to you!
Benefits to You, the Borrower
â€¢Low down payment and flexible mortgage terms (fixed- rate or adjustable-rate).
â€¢Down payment (at least 3 percent) can be funded by the borrowerâ€™s own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
â€¢Renovation amount based on appraisal â€œas completedâ€ value.
â€¢No mortgage insurance; ask your lender for cost details on loans without mortgage insurance.
â€¢Expanded seller contributions for closing costs allowed.
â€¢Available for primary residences, second homes, and investment properties.
â€¢Many condo project requirements are waived; ask your lender for details.
â€¢For more information about the renovation process, contact a HomePath Renovation Mortgage lender.