Credit scores 823/816/807. Financing options besides Homepath for h-path property that needs approx. $4K in repairs? I only have enough for 3.5% dn.

Asked by Lisa, Maryland Mon Jan 3, 2011

I have approx. $10K total for a home purchase/settlement. Putting an offer in on a Homepath property and the listing agent says FHA has slim chance of being accepted. Are they Just trying to sell this homepath mortgage to prospective buyers or can the bank "require" it be utilized? I'm thinking approx. $4K in repairs needed, but none that are included in the FHA requirements. (Vinyl floor, Refrigerator and stove). What are my financing options besides homepath? Did the research on Homepath, interest rates are higher and even though pmi not required, this looks to me like in the long run, not for me.

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Voices Member, , Red Wing, MN
Tue Jan 4, 2011
I think at this point your only other option would be the FHA 203k loan, you will need to see what the difference is between rates for both programs in your area and also make sure to take into account even if the HomePath has a higher rate you have to consider the up front mortgage premium and monthly mortgage insurance of the FHA loan.
Sean Wait
Senior Loan Officer
Spectra Financial Home Mortgage
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Elliott R. O…, Agent, McLean, VA
Tue Jan 4, 2011
Dawn, in many cases with FHA financing the loan can be structured with a repair escrow up to $5,000 for the type of repairs you have stated (not structural). The most important question here is who is going to pay for the repairs? Is the bank willing to contribute some of the proceeds to fund the escrow account? If so, that would be ideal since it does not come out of your pocket and you can still get in with just 3.5% down.

On a typical 203b FHA transaction with a repair escrow up to $5,000 you have to get a quote for the repairs/materials/work from a licensed contractor and have 30 to 60 days AFTER closing to have the work completed. Once it is done the work has to be inspected and approved by the lender.

Now, not all lenders handle this type of transaction the same way. Some will require for the repairs to be done before closing so just shop around and see who best suits your needs.

Thank you and good luck.

Elliott R. Oliva
Mortgage Planner
NMLS #353884
Envoy Mortgage
202-681-1636 phone
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David Zucker…, , Frederick, MD
Tue Jan 4, 2011
Dawn, I agree with the listing agent. If you are trying to purchase the house using a standard FHA 203b home loan the appraiser will flag any deficiency as an "appraisal condition" which has to be satisfied prior to the lender approving the loan. Fannie Mae doesn't like to deal with appraisal condition, which means that if you submit an offer based on standard FHA financing there is a very good chance your offer will not be accepted. From the Asset Manager and Listing Agents perspective you are trying to get a square block through a round whole regarding your financing.

So your next logical step is to either pursue one of the following two paths. If the house in approved for both the HomePath and HomePath Renovation financing you have the option of purchasing the house without financing the repairs and complete the repair project post settlement on your own. This is the benefit of the HomePath loan when some work is required and you have the ability to finish the work yourself. Basically Fannie Mae is creating a double standard in that they are willing to over look small property deficiencies on their REO's.

Your next option is go with a Fannie Mae HomePath or FHA 203k Renovation loan. Both have their pros and cons. When comparing interest rates you would be better served comparing just the rates on these two loan types as oppose to a standard FHA 203b loan Vs. either the HomePath renovation or FHA 203k loan. Even a FHA 203k loan will have a .375 to .5% interest rate premium over the standard FHA 203b loan.

Also, you should look into putting 5% down as this is the "sweet spot" for HomePath financing for your credit scores. Lastly, make sure you budget for paying both sides of the transfer and recordation taxes as Fannie Mae won't pay these.

Feel free to call me if you have any questions. I am available at (410) 552-5912 and one of only four lenders offering the HomePath Renovation loan in Maryland. Also, check out my website for more information on the FHA 203k loan:
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Nick Pakulla, Mortgage Broker Or Lender, Rockville, MD
Tue Jan 4, 2011
Is the property livable, besides the missing appliances? Ie: any broken / cracked windows or walls, floors, mold, etc? What county is the property in / what is the address? You will have a very tough time getting Fannie to approve any repairs, that is why they created the homepath program.

The listing agents that list homepath properties usually have a great deal of experience with them – so I would trust their judgment - BUT if the property is generally in livable condition, there may be a way to get it through FHA. I would be happy to go over the options.
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Suzanne MacD…, Agent, Succasunna, NJ
Tue Jan 4, 2011
Try FHA203K loan. It is a rehab loan. The bank will lend you the money to purchase the property as well as noney to do the repairs. There are two types, one for smaller amounts of money, which sounds like what you need, that allows the homeowner to hire professionals from local home improvement stores (talk to your realtor about Lowe's Realtor Benefits) and loans for larger amounts where the homeowner hires a general contractor to oversee the repair of big ticket items like the roof or heating system, etc.

FHA203K loan is the way to go.
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Marie Hardin, Agent, MD,
Tue Jan 4, 2011
Hi Dawn,

Have you considered going to another loan officer. There are still programs that will assist you with the funds you need to purchase in certain areas. I would pursue all options before making a decision on just one. The advantage of the Homepath is that they will finance their own properties and the FHA required repairs have already been done. A part of the purchase process is to see what can be negotiated on your behalf. Maybe you can get the repairs/items rolled in. Are you being represented through a Buyer's Agent? Good luck and congratulations on your great credit..
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The Roskelly…, Agent, Gambrills, MD
Mon Jan 3, 2011
Hi Dawn,

With a limit of just 3.5% down you are pretty much limited to FHA financing but I'm shocked the agent would discourage you from using an FHA loan. Check out this blurb on financing offered on the web site. I do not believe they are supposed to limit you or discourage you from obtaining FHA financing.

Congratulations on your impeccable credit. And best of luck to you in finding and settling on your perfect home!
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