Homepath 10% Down Investor Purchase No-Brainer!

36 Replies

I have long had 4 financed properties so I have been paying 25% down plus closing costs for each new investment. I takes time for me to scrape together that kind of money for my buy and hold investment style. When I heard the recent BP podcast on Homepath I ecstatic. I had also done quite a bit of investing out of state due to price point and cash flow but now with Homepath properties right here in Washington state surrounding Joint Base Lewis McChord now make sense. Crunching the numbers I can realize strong positive cash flow and a 16% ROI.

I am retired Army and have great success keeping my properties in this area rented to both military and civilians. I have turned properties within a week and good tenants literally line up around here with good marketing and a quality unit. Once I have 10 financed properties Homepath is still a great tool to move up to 20 Fannie Mae financed properties by putting 25% or 30% down.

This is a big help in building my portfolio and helping to replace my earned income for a real retirement. I think about it this way, for every new investment property I acquire under my criteria that is one more day per month for the rest of my life that I don't have to work!

@Mitch Dowler with Homepath loans when you only put down 10%, do you have to pay PMI? I have some Homepaths but put down 20-25%

You do not have to pay PMI and there is no appraisal required. Read the financing and the Investors tabs. They are not exactly clear but Investors pay 10% down for up to 10 properties.

Homepath

Which podcast was this discussed on?

This was podcast 64, 50 Units in 5 Years


Wow, just checked out the link..... What offers will they accept on the properties? face value or can you squeeze a 20-30% profit out?

Thanks for the info..

Mitch --

You need to check on the number of properties you can have financed in your name in order to qualify for the 10% down option. I started my real estate career buying homepath and I stopped once I hit the max allowed for 10% down. I don't remember the number but it's no where near 10 from what I remember. You may be allowed 10 total but the majority of those would be at an out of pocket expense over 10% from what I remember.

You can have up to 10 financed properties and still do a Homepath for 10$ down. For the next 10 you would need to put down 25-30%. I have my lender in place for this and an agent experienced in Homepath investments. You can submit whatever offer you wish. For the property I placed an offer on I know that it has been listed for some time and had a failed sale. I am offering 80% of the list price and requesting 3.5% for closing costs. Will need to see what they come back with.

I need to take another look at Homepath. The last time I inquired in my area, it was difficult finding an investor friendly lender(2 years ago).

@Mitch Dowler

@Westin Hudnall

What kind of lenders are doing these deals? Will any lender sign off on Homepath loans with 10% down? Could you please provide some specific names? Would love to get involved here. Thanks so much.

Only certain lenders participate in the Homepath program. There is a list on the Homepath page. Note that brokers may also deal in Homepath and originate loans with investors on this list but brokers will not be listed. I am using Ridge Lending who is licensed in several states.

Toll Free 855.74.RIDGE (74343)

Direct 503.244-4161
Fax 503.821.7797
e-mail [email protected]
web www.RidgeLendingGroup.com
Company NMLS # 34683
Personal NMLS # 9556

I used aimloans. They were the best rate I could find

You don't have to be in their area for them to give

You a loan. I'm in Wichita Ks and they provided the loan from California

Bear in mind that the 10% is for SFH investments only. 2-4 unit buildings require a larger down payment.

Homepath Down Payments at Fannie

Most of the great bargains get bought by owner occupiers before investors can get them (in my market of interest). Most of the remaining bargains need a lot of rehab and are not approved for a straight Homepath loan, you need a Homepath Renovation loan. The Renovation loan requires 25% down, a new appraisal by the lender and there are far fewer lenders which will do them.

If you can find a good deal that is approved for a straight 10% Homepath loan then it is definitely a powerful tool to conserve cash for the next acquisition.

Inventory availability will of course vary by market. First Look is offered for I believe the first 20 days for owner occupied. Here in my area there is still a good inventory available for investors. I looked at some great properties and placed my offer on the one that best met my criteria. I prefer single family because the apreciation is greater, they are easier to sell, and I can get higher quality tenants. For multi-family I prefer commercial multifamily so that the advantages of forced apreciation and lower expenses per door can be experienced.

here is a contact I used from AIM loans.

Janice Hulse -
NMLS# 45865
Senior Loan Consultant
888-411-4246 ext 237
[email protected]
Fax/Direct: 619-814-8237

The 2 I purchased were in fantastic rental neighborhoods. The 1st had just 15k equity for a property worth 135 but I didn't care because it needed absolutely no maintenance and my out of pocket was very little. It rented in 1 day for 600/month above my mortgage. The 2nd property I bought for 118k, put 10 in it and appraised for 150k and rented for 550/month over my mortgage. Some of their properties are available only for the homepath loan and some allow for the renovation loan. On the renovation loan you get loaned 15% of purchase price plus rehab. Example: purchase price 100k w/ 50k rehab you would only be out of pocket 15k (15%). This option is great for the homepath homes needing a lot of rehab

Originally posted by @Richard F. :
@Mitch Dowler with Homepath loans when you only put down 10%, do you have to pay PMI? I have some Homepaths but put down 20-25%

Yes there is PMI. You can pay it monthly which is the most typical or you can pay it as a single premium which can be as much as 3.25 points at closing. This amount can be an upfront cost in cash or you can absorb this cost through electing a higher rate which is considered lender paid MI.

LPMI or lender paid MI can be done through a higher rate but sometimes there is not enough yield spread or rebate "money," available in your rate sheet to even absorb this entire cost through the rate you select. In this case you'll then have to pay the difference with cash along with down payment and all the other closing costs/prepaids/etc.

Just to buy a 10% down property that is non owner financed single family residence (not even counting the MI) its already 4.25 points adjustment meaning at today's rate of 4.625% 30 year fixed it would cost you 4.25 pts + closing and prepaid tax/insurance/interest.

To absorb some of the cost you could elect for a 5.125% which has 2.5% points in rebate so that would lower your cost from 4.25% pts to 1.75% pts up front. Your pricing at 5.125% 30 year fixed would then be quoted at 1.75 pts today. This also assumes 740 + fico score.

So the glitz and the glamour of the program is not as rosy as most people think, yes its still good but one should consider pro's and the con's closely.

The pro's are high leverage and no appraisal but cons are a premium in rate you'll end up paying (.125 to .25% in rate) plus lots of points for non owner and higher loan to value such as 90% LTV or 10% down. No Appraisal could be a con for some people because I've seen unscrupulous agents try to sell over valued property to unsuspecting new homeowners on the premise that this property didn't require an appraisal and that that was a bonus! What was not mentioned was that the additional sales price the buyer was paying.

Long story short I recommended the buyer go to standard conventional and the appraisal came in at 25,000 below and the seller(Fannie Mae) after back and forth negotiations agreed to reduce their price. End of the day the buyer ended up saving 25,000 dollars for the same property and the listing agent was peeved that I convinced the buyer to utilize standard conventional 95% LTV financing with no MMI (lender paid). This was back in June 2012 so times are different for sure.

So before you jump on the hype I would recommend to get all the information.

None of the above is to constitute pricing for your particular scenario but rather to explain how pricing scenarios work utilizing the Home Path Program.

Albert makes some good points but don't let them spook any of you. The bottom line for all of us is that we each want to pay the least amount out of pocket correct ? Who cares if its in loan fees; principal; interest; whatever.

My point is without homepath an investor has to pay 15% or more down so Is the extra loan fees more or less than 5% of your purchase price? In most all cases it will be less. You can ask the seller to pay up to a certain % of closing costs --- 3.5% maybe ? (If I remember right) so in essence ; your only out of pocket 10% of a large portion of your loan fees as well.

Originally posted by @Westin Hudnall :
Mitch --
You need to check on the number of properties you can have financed in your name in order to qualify for the 10% down option. I started my real estate career buying homepath and I stopped once I hit the max allowed for 10% down. I don't remember the number but it's no where near 10 from what I remember. You may be allowed 10 total but the majority of those would be at an out of pocket expense over 10% from what I remember.

Thats because the limit is 4 for 10% down SFR non owner.

There is up to 10 financed properties per social security # but the guidelines from 5-10 financed properties revert to more a restrictive 720 min, 6 months reserves on each property, and lower LTV's by 5% (extra 5% down payment on normal guides).

You cannot have 20 financed properties (unless you strategically plan it 10 for you and 10 for your spouse/partner or you utilize portfolio/private money).

Originally posted by @Westin Hudnall :
Albert makes some good points but don't let them spook any of you. The bottom line for all of us is that we each want to pay the least amount out of pocket correct ? Who cares if its in loan fees; principal; interest; whatever.

My point is without homepath an investor has to pay 15% or more down so Is the extra loan fees more or less than 5% of your purchase price? In most all cases it will be less. You can ask the seller to pay up to a certain % of closing costs --- 3.5% maybe ? (If I remember right) so in essence ; your only out of pocket 10% of a large portion of your loan fees as well.

I am not saying its not a good deal I am just saying "caveat emptor," and do you due dillgence since each investor will have their required yields they need to make their go decision.

On the above scenario the primary residence buyer was pushed into home path and would have paid 25,000 more but I am sure that would not happen to an investor (probably) who is more educated about the market comparables.

Costs such as monthly MI (if buyer elects to not single pay their MI) could drastically lower your cash on cash return annually however if the deal still makes sense and you approve it through your method of evaluation whether it be cap rate, GRM, cash on cash, break even ratio, debt service ratio, or etc it can still be a good decision to move forward on the program.

The maximum seller concessions for a non owner transaction are 2% of the sales price.

Albert ---

Your entirety too intelligent for me to keep up with :)

I feel like I'm going to flip on HGTV and you see on one of those "house flipping shows" buying a property on the courthouse steps lol

Originally posted by @Rolanda Eldridge :
I need to take another look at Homepath. The last time I inquired in my area, it was difficult finding an investor friendly lender(2 years ago).

The loan process is complicated enough so I wouldnt blame most lenders to understand all the guidelines, reserves, LTV's, seasoned funds, debt to income, etc etc. The loan process atleast for residential financing has so much paperwork and governmental regulation that as a lender we get enough brain damage just from the operations of processing a loan. Investors and business owners/self employed have probably double to triple the paper work needed to do a loan. I would recommend you find a lender who enjoys working with the investor/self employed borrower or one who invests themselves because those are the ones that can probably be a huge resource to you.

I just want to reiterate that the Homepath program DOES NOT require PMI ore mortgage insurance for a 10% INVESTOR purchase. My lender knows this, my real estate agent knows this, and Biggerpockets has a page on the Homepath program as well that state this. The interest rate last week from my lender was 5.25% with no points. My lender knows my situation well and I just completed a refi with them one month ago.

http://www.biggerpockets.com/mortgage/homepath-loan/homepath-loan-or-fha-loan/

There have also been changes to the Homepath program which make it a better deal than it once was for investors. The Homepath web page specifically states that financing for more than 10 properties and up to 20 is under the following terms:

  • Up to 20 financed 1- to 4-unit properties
  • Individual and LLC borrowers eligible
  • Loan to value max 70%
  • No lender-requested appraisal
  • Flexible mortgage terms (fixed-rate, adjustable rate)

http://www.homepath.com/investors.html#mortgage-info-content

Research for yourself and find an experienced Homepath lender and an experienced Homepath agent as I did. Do not rely on the information I pass on alone or the information from detractors.

Originally posted by @Mitch Dowler :
I just want to reiterate that the Homepath program DOES NOT require PMI ore mortgage insurance for a 10% INVESTOR purchase. My lender knows this, my real estate agent knows this, and Biggerpockets has a page on the Homepath program as well that state this. The interest rate last week from my lender was 5.25% with no points. My lender knows my situation well and I just completed a refi with them one month ago.
http://www.biggerpockets.com/mortgage/homepath-loan/homepath-loan-or-fha-loan/

There have also been changes to the Homepath program which make it a better deal than it once was for investors. The Homepath web page specifically states that financing for more than 10 properties and up to 20 is under the following terms:

  • Up to 20 financed 1- to 4-unit properties
  • Individual and LLC borrowers eligible
  • Loan to value max 70%
  • No lender-requested appraisal
  • Flexible mortgage terms (fixed-rate, adjustable rate)

http://www.homepath.com/investors.html#mortgage-info-content

Research for yourself and find an experienced Homepath lender and an experienced Homepath agent as I did. Do not rely on the information I pass on alone or the information from detractors.

The expanded guidelines are available in theory, however I will believe it when I actually fund the deal for 10-20 financed properties from Fannie. Wells will definitely not take it and my bank as far as I know will not accommodate/service or sell on expanded guidelines.

I have portfolio lenders who will entertain unlimited financed properties at 65-75% LTV only in beach cities southern CA.

As a lender you'd want to talk to your secondary markets gay/gal to make sure your ability to sell/service on expanded guides is available but bank overlays have limited this niche.

Please let me know however once you get to #11+

Originally posted by @Albert Bui :
Originally posted by @Richard F.:
@Mitch Dowler with Homepath loans when you only put down 10%, do you have to pay PMI? I have some Homepaths but put down 20-25%

Yes there is PMI. <SNIP>

Long story short I recommended the buyer go to standard conventional and the appraisal came in at 25,000 below and the seller(Fannie Mae) after back and forth negotiations agreed to reduce their price. End of the day the buyer ended up saving 25,000 dollars for the same property and the listing agent was peeved that I convinced the buyer to utilize standard conventional 95% LTV financing with no MMI (lender paid). This was back in June 2012 so times are different for sure.

Albert, thanks for the information. Just like my parents taught me I thought there was no "free lunch".

How are those $800k -- ~1800 square feet - west Irvine 92602 - $1,000+ a month in tax/mello roos/hoa -- homes selling? ;)

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