Homes with mortgages guaranteed by Fannie Mae, or the Federal National Mortgage Association, a government-sponsored enterprise, are being foreclosed upon as rapidly as those with conventional mortgages. This leaves Fannie Mae with an inventory of properties it must sell. Offering buyers incentives via the HomePath mortgage program is helping clear Fannie Mae’s balance sheets and allows buyers purchasing power with favorable terms. Qualifying for a HomePath mortgage is more stringent than with other governmental-backed loans, but the advantages reward those with good credit.
Prepare for a meeting with a HomePath mortgage lender by understanding your current financial profile. Investigate your FICO score. Calculate your debt-to-income ratio. Accumulate cash in the bank to use as a down payment. Decide whether you’re going to live in the property, be an investor and rent it out, or use it as a second home, as HomePath mortgages are available for all three scenarios.
Apply for a HomePath mortgage if your credit score is 660 or higher, you plan to live in the house and are putting a 3 percent investment as a down payment. Submit a mortgage application with a 620 credit score but be prepared to pay a 20 percent down payment for an owner-occupied home. Use the property as a second home if your credit score is 660 or above and as an investment if your score is 700 or higher.
Apply for a HomePath mortgage if you’ve had a foreclosure, bankruptcy or deed in lieu of foreclosure, but expect to pay 10 percent cash as a down payment. Don’t have mortgage or rent delinquencies for more than 60 days in the 12 months prior to the credit report.
Submit your financial records and bank statements to a HomePath lender in an attempt to get a HomePath pre-approval letter. Add your monthly expenses and subtract them from your gross income to arrive at your DTI ratio, as a HomePath mortgage requires a maximum 55 percent DTI score. Decrease your credit card obligations to at least 25 percent of the maximum allowed. Remain current on all bills.
Accept a monetary gift of the down payment amount if the property is to be your primary residence. Have cash in the bank for at least three months to cover 5 percent of the purchase price if you’re using the HomePath mortgage for a second home. Do not expect to use a monetary gift for a down payment on an investment property if you’re applying for HomePath funding.
Take advantage of HomePath terms by not having to get an appraisal of the property and foregoing mortgage insurance.
Buy down the interest rate by paying points at closing. Wrap the closing costs into the price as Fannie Mae offers a 3.5 percent closing cost incentive.
You may have to wait seven years to apply for a HomePath mortgage if you’ve had a short sale or 48 months if you’ve had a loan modification on your current or former residence.
You'll pay for the HomePath incentives by agreeing to a higher interest rate for the loan. Mobile homes do not qualify for HomePath mortgages.
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