The Fannie Mae Homepath program was created to offer homebuyers the chance to buy foreclosed homes.
Before the program was created, investors could buy the foreclosed properties before any buyers had a chance to see them.
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Homepath is Now Called the ReadyBuyer™ Mortgage Program
The ReadyBuyer HomePath program is for first-time homebuyers and investors. It requires a downpayment of 3%, and 3% is given back to you in the form of closing costs by completing the training program.
The training program costs $75 and is done online. After you complete the training, you will receive a certificate to turn in with your contact to receive 3% back for closing costs.
ReadyBuyer™ Program Benefits
- Credit scores of 640 and higher may qualify
- 3% cash back to use towards closing costs
- 5% down payment
- No PMI required
- Home appraisal not required
- C0-op and Condo approvals can be waived in some cases
- Fixed-rate and adjustable mortgage terms available
- Investors can use the loan on up to 20 properties
ReadyBuyer™ Mortgage Requirements
- 5% downpayment
- 640 minimum credit score is required
- Stable employment (2 years with current employer)
- Two years of W2’s and Tax returns
- No more than one late payment in the past 12 months
- HomePath Buyer Education Course
- Must have a real estate agent or broker
- Only HUD homes from the HomePath website are eligible
To qualify for a mortgage, a lender must check your credit scores and review your credit report for any derogatory items. Verify income using your W2’s, paycheck stubs, bank statements, and tax returns; Properties must be Fannie Mae HomePath eligible.
A knowledgeable real estate agent can help you to locate participating properties.
No Mortgage Insurance Premium (MIP)
One of the biggest advantages of a Fannie Mae HomePath loan is that MIP, mortgage insurance premiums, are not required. With MIP being 0.85% for FHA loans, which is $850 per $100,000, this is a huge discount.
ReadyBuyer Loan Alternatives
Home Possible and HomeReady Loan
The HomeReady mortgage from Fannie Mae is a conventional loan program specifically for low-income first-time homebuyers. To be eligible, your income cannot exceed 100% of the area median income.
Freddie Mac’s Home Possible loan program is very similar to the HomeReady mortgage. Both programs require a 620 credit score, 3% down payment, and first-time buyers who meet the income requirements.
Home Possible / HomeReady Loan Benefits
• 3% down payment
• Up to 50% DTI ratio
• Alternate income sources accepted
• Fixed mortgage payments
• Low mortgage insurance premiums
• PMI not required once LTV ratio reaches 78%
FHA loans require just a 3.5% down payment with a 580 credit score.
No cash back for closing costs, but the seller is allowed to pay up to 6% of the buyer’s closing costs; you will need to negotiate that in.
2020 FHA Loan Requirements
• 580 credit score with 3.5% down
• 500-579 score with 10% down
• Maximum 50% debt-to-income ratio
• Two years of stable employment and income history
• For primary residence only
• 24 month waiting period after a foreclosure or bankruptcy
• 1% of student loan debt added to DTI ratio
Standard Homepath mortgage program (discontinued)
The standard program is strictly for home buyers looking to purchase a move-in ready foreclosed home that they will occupy as their primary residence. Investors can not use the standard Home path program.
Renovation Homepath mortgage program (discontinued)
The renovation program is used for a home path property that needs major repairs before it is inhabitable. You can receive 35% of the after repaired value of the home to $35,000. Renovation Homepath mortgages are available to investors and traditional home buyers; they require a small downpayment, and no private mortgage insurance is required.