I've been reading a bit about HomePath (by Fannie Mae) and trying to get a sense of what experienced investors think of it as a starting point for new investors.
Why my wife and I are considering itL
- 10% down payment
- No requirement for using it as a primary residence
The properties seem to be in various states of disrepair (some of them mostly cosmetic) which doesn't scare us, we can source contractors and do cosmetic work ourselves. Inventory is low in our area, but we have time on our side to keep an eye out.
Also, there seems to be confusion around HomePath vs HomeStyle; from what I gather online they're not the same thing, but some people here insist that they are. Any clarity here?
We'd love your thoughts on a new investor considering HomePath as an option to keep up front costs low and get us started more quickly.
Thanks in advance!
Homepath financing no longer exist, for 4-5 years or so, you have to finance a Homepath property the same as you would any other. Home style financing is what you’re looking for.
@Kyle M Miller Homestyle is Fannie Mae's version of a renovation loan similar to a FHA 203k loan which I am sure you have heard of. Homepath.com is a website where Fannie Mae lists their foreclosure inventory.
Personally I think buying a HUD home or a Fannie Mae Homepath home are a great way for beginner investors to house hack a property. If you listen to this weeks BP Money podcast with @Scott Trench and @Mindy Jensen , Scott describes using this strategy as a "cheat code" and I agree with him because of these reasons:
- The exclusive owner occupant bidding period for these homes gives you access to purchase properties you would never be able to purchase if investors also had access. This is a major advantage. HUD and Fannie both have these first look periods for owner occupants.
- The low down payment options (3.5-5%) gives you the ability to buy at a price point you probably would not be able to if you were buying at 25% down with a non-owner occupied investment loan. The by-product of expanding your price range is you should be able to buy in a better neighborhood than you would otherwise. This is great for comparatively expensive markets like the one we have here in Connecticut or maybe even where you are in Washington.
- If done correctly, in the end after the renovation is completed you should have equity in the property and have taken care of a lot of the deferred maintenance with the rehab funds loaned to you. This is important because not only are you saving money on your living expenses by house hacking, but you should be able to build up your reserves even more because that deferred maintenance was done during the rehab phase. This is an aspect of using the renovation loan that I think people overlook and is a major benefit.
I could go on and on about the advantage of these rehab loans as you can tell. I think they are a fantastic product. My clients have had a lot of success with them over the years.
@Michael Noto thank you for the detailed advice.
That separation between HomePath and Homestyle finally makes sense. I'm definitely interested in foreclosed homes so I'll keep an eye out on HomePath, etc.
The more I hear about house hacking the more I wish my wife and I considered that prior to purchasing our primary residence a year ago. It's still an option and a great move financially, but the lifestyle transition isn't exactly appealing. That said, given our cash position, it's easily the most feasible way for us to get our feet wet. Your third bullet is an especially interesting argument that I haven't heard before...
We've got a little time before we're going to make our first investment, so I'm trying to learn as much as possible and keep my options (and my mind) open. Maybe convincing ourselves to house hack would be worth it!
I am a new investor and in the R&D phase and figuring out how to obtain capital for my first flip. Does this type of financing through Homestyle require the owner to reside in the home while renovating?
@Jenni Rivera from what I gather, there's no requirement to reside in the property. That said, they give an advantage to owner-occupied buyers (they get a chance to bid first).
Thanks @Kyle Miller
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