Homepath Investor Financing Question?

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Homepath Investor Financing Question?

Marlan Jones
Real Estate Investor · OH · Member since 2010 · 9 posts · 0 votes

Hello All,

I have located a property I am currently interested in purchasing as an investment property via the homepath website. It has the homepath mortgage logo so I assume it is eligble for the homepath financing option I have beeen reading about. The property is listed for $12,000 and needs mostly cosmetic work(which I already have contractors lined up to complete).

My first question pertains to the feasibility of obtaining a loan for such a small purchase amount. I have read several blogs stating banks typically won't touch anything under 30k(yet in my area on the homepath site there are several homes listed under this dollar amount with the homepath logo)

My second question is what are Fannie's downpayment requirements on NOO properties? I have been reading that most are now requiring 15% down as opposed to the old rule of 10%. I am wondering if anyone has had recent experience using this form of financing and can verify if it's 10% or 15%?.

My third question pertains to Homepath financing VS commercial financing of SFH, as I was told by an originator it is extremely costly to use Homepath. Which in all you guys past experience would be the more cost efficient form to finance? (I just recently formed an LLC and ultimately would like to either purchase in the name of the LLC or move the property into the LLC for protection as well as building credit for the LLC.

Thanks in advance for any responses or advice given!!

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y

Homepath will finance small loans, and from what I've recently heard from my broker, the new downpayment requirement is 15% with PMI.

I would recommend contacting a broker who deals with Homepath loans, and ask what the typical closing costs would be on a purchase like this; I suspect that any time you use financing to purchase a $12K property, the loan costs will be relatively very high.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    15y

    Homepath will finance small loans, and from what I've recently heard from my broker, the new downpayment requirement is 15% with PMI.

    I would recommend contacting a broker who deals with Homepath loans, and ask what the typical closing costs would be on a purchase like this; I suspect that any time you use financing to purchase a $12K property, the loan costs will be relatively very high.

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  • Marlan Jones
    OP
    Real Estate Investor · OH · Member since 2010 · 9 posts · 0 votes
    15y

    Thanks for the reply, I was under the impression the Homepath loans didnt have PMI? Is the no PMI just for owner occupied properties?

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    I might be making an application for financing through HomePath soon. The lender (Regions) said that the down-payment requirement is 10% for the first four investor loans, then it goes up to 25%.

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    I am trying to hunt down a lender in PA that deals with the investor loans for Homepath. I have checked the homepath website and found several lenders in PA that deal with homepath however they are all for OO mortgages. Any ideas on how to hunt down a lender that deals with the homepath investors mortgages?

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    Why not just ask the listing agent for a referral?

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    I actually just emailed him late last night. I just havn't heard anything back. Paul, is the property your looking at qualify for a reno mortgage or just the mortgage?

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    I spoke with the listing agent and she indicated that there were no local companies dealing with NOO homepath loans. the only few in the area all deal with OO homepath loans. Are there any national lenders or regional lenders known to approve NOO homepath loans?

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  • Brad P.
    Real Estate Investor · West Des Moines, IA · Member since 2009 · 55 posts · 21 votes
    15y
    Originally posted by Wesley Adams:
    I spoke with the listing agent and she indicated that there were no local companies dealing with NOO homepath loans. the only few in the area all deal with OO homepath loans. Are there any national lenders or regional lenders known to approve NOO homepath loans?

    Per the homepath website, the following lenders will do Mortgage Renovation loans in PA:

    Colonial National Mortgage
    First Place Bank
    First Merit Mortgage
    Flagstar Bank
    PrimeLending

    http://www.homepath.com/financing/renovationlenders.html

    Several of these are national banks and do business in multiple states.

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    Brad, thanks for your help but, I had already checked out those sites. It seems that they all want the borrower to occupy the property. The only one that didn't mention that on their site was flagstar. I placed a call and an email to them to find out what's up. i'll keep this thread posted.. thanks again

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    I just spoke with a lender from Fidelity. They do have the NOO/Renovation product.

    The one thing I'm not in love with is that they really do prefer you to use one of their "preapproved" contractors. Who knows what kind of pricing these guys offer, especially since they are "preapproved."

    In a nutshell, though, you give them the estimate of your repairs, and you can borrow 90% of that amount on top of 90% of the purchase price. There's only one draw at the end of the renovation period, and the check is payable to you and the contractor.

    They are more likely to buy into your estimates and scope of work if you use a preapproved contractor.

    Seems like a good way to get financing for properties where you could never get purchase-money based on their condition, but you're free to try your own crew. If you tell them you're doing it yourself, you're probably out of luck unless you're also a licensed tradesperson.

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    Paul, thank you for the heads up. When you say the check is payable to you and the contractor at the end of the renovation period are you saying that I (as the borrower) is responsible for fronting the cost of the renovations until their "renovation period" is over? Did they indicate how long the renovation period was? or just until the reno is complete?

    I am speaking to a regional mortgage lender that I was forwarded to from a different lender. Again, I'll keep this thread updated as I get some answers.

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    Depending on the size and timeline of the job, I would try to defer any payment to the contractor until the job was done. And obviously the bulk of the money is not coming until the end anyway...

    Normally you'd have a draw schedule, but I didn't get the impression that was how this worked. I'll email him and ask.

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  • Marlan Jones
    OP
    Real Estate Investor · OH · Member since 2010 · 9 posts · 0 votes
    15y

    Wesley, If you are intrested in a property that only qualifies for the "mortgage" portion of the homepath program PNC Mortgage is a national lender that will work with investors.

    The loan officer I spoke with said it would be a little more expensive in points and higher intrest rate than a conventional FHA. No PMI on investor purchases either which makes this financing appealing to me. Hopefully nothing falls through at the last minute :lol:

    I have yet to do a property inspection on the home Im intrested in. I obviously will do my due dillegence in having one as a contingency in my offer if I make one but is it safe to say that if a home qualifies for the "mortgage" portion of the homepath program as a general rule that all major functions are in tact?(Furnace, plumbing, electric, windows for theoritcal purposes??) Or has anyone come across one that was financeable w/o the reno portion and has these things damaged or missing?

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    Ok.. so after much phone tag I just got off the phone with Integrity Bank. Basically, the loan officer mentioned that due to the low price of the property I was looking at (20K), the lender would consider it a high cost loan. She also mentioned that the loan would have extra fees and 4 points. I'm kind of lost on what direction to take now. When I asked her what the price threshold is where the loan it's self wouldn't be stuffed full of excessive fees up to the amount limited to by homepath, she stated that the 60K mark would be about that point. So goodbye to my wonderful little dreams of purchasing my first property for 20k with only 10% down. She hasn't forwarded me any actual values for the loan... do you all think it would be best to request that anyway or reboot and find another way to finance?
    Any ideas are certainly welcome. I simply don't have enough $$ to push myself into the 60K+ range on the first go around.

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    Were you buying this for a long-term hold? I can't see how the financing costs are holding you back.

    Write an offer, ensure you have a kick-out, then get the other people involved in helping you to get this deal done. No one gets paid to impede your progress.

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    I had planned on keeping this long term.. I am more comfortable with holding and improving then cash out refinancing at the end of a year or two to go buy some additional properties.

    I'm not sure I understand your point? What do you mean by financial costs holding me back? Should I just get a list of scheduled fees associated with this "high cost loan"from the lender and see if when it is all said and done I come out on top?

    Also, I have never written an offer and not entirely sure what you meant by "kick-out" but I will research that some more. Have you ever placed offers without knowing where your financing is coming from first?

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  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    I think you might be in for a surprise when you go for a cash-out refi on a non-owner occupied property. I am not sure that product even exists right now, but I could be wrong.

    What I meant by the financial costs is that the higher fees and points might not turn this into a bad deal. Sure, they're higher than you want to pay, but what's the alternative? Not doing anything? If the deal was so marginal that an extra few points are wrecking it (and it's a long term hold), the deal was too tight to begin with.

    As far as making an offer, you should always have a way to get out of the deal if you don't like it. That could be an inspection clause or a financing contingency, although the latter is not very common in REO deals where the seller wants to know the financing is lined up.

    Have you been prequalified anywhere for this deal?

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  • Wesley Adams
    Real Estate Investor · Austin, TX · Member since 2010 · 64 posts · 10 votes
    15y

    No, not pre-qualified yet. And thats where I'm stuck right now. Talking to that lender today it was as if she was deciding for me that the loan was too much. I sent her an email explaining that I felt I had enough wiggle room on the property to carry a higher mortgage due to added fees and points. And your right, as of right now.... what alternatives do I really have? Go beg and hope to borrow from my well-to-do relatives?? I asked her to send me a quote so that I could run the numbers as well. I will also look to other lenders as well. I knew it was going to be tough to find financing on such a low cost property, but if it were easy.. everyone would do it. Thanks again for putting things into perspective for me.

    0Reply
  • Steve Crawford
    Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes
    15y

    I too was advised, yesterday, that it was 10% down, no PMI, 30 yr fix money avail and only applied to first 4 properties. ...........for NOO.

    I am a bit cautious that some of these REO are marked up a bit higher due to this Homepath product.

    I have noted that HUD can come down a quick 9-10 % (in my region at least) once it hits "all bidders", but Fannie, so Im told, isn't moving but a couple of points b/c of the demand for their REO ............via Homepath????

    Anybody else consider this???

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y
    Originally posted by Wesley Adams:
    I am trying to hunt down a lender in PA that deals with the investor loans for Homepath. I have checked the homepath website and found several lenders in PA that deal with homepath however they are all for OO mortgages. Any ideas on how to hunt down a lender that deals with the homepath investors mortgages?

    Go to the Homepather web site, they list the lenders in your area. Many are national and you can select one.

    0Reply
  • Bryan Smajd
    Member since 2011 · 1 post · 0 votes
    15y

    Can someone please point me toward Fannie Mae documentation that states that the first four investor loans can be with 10% down? My mortgage banker doesn't believe me.

    0Reply
  • Paul B.
    Real Estate Investor · Alpharetta, GA · Member since 2010 · 415 posts · 484 votes
    15y

    This is not from FNMA, but it's from a mortgage banker at Fidelity (an email):

    Just wanted to let you know that Regions has started offering Homepath Financing. Please see the specs below and let me know when we can set up a time to meet. Have a great weekend!

    10-30 yr FRM
    No Appraisal required
    No Mortgage Insurance required
    Max LTV 97% for 1 unit Owner Occupied
    Max LTV 90% for 2-4 unit Investment property
    Seller Contributions up to 6% with CLTVs greater than 90%

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  • Tom Chaney
    Member since 2011 · 1 post · 1 vote
    15y

    I work for a local credit union and had a client wanting more info on HOMEPATH financing.

    I found our correspondent does require 15% down, but it is an overlay of the FannieMae program. I call a friend at CITImortgage and they are still at 10% down for NOO.

    Moral is to call aorund and see who does not have the overlay of the extra 5% down cushion.

    1Reply
  • Marlan Jones
    OP
    Real Estate Investor · OH · Member since 2010 · 9 posts · 0 votes
    15y

    HELP -

    I have my property under contract via homepath mortgage financing and with 17 days till closing I receive a call from my banker stating I need to have 9k more in savings otherwise the deal is dead. I have 13k in savings and a DTI ratio of 36% including PITI and the home im purchasing is $33,000 what's the problem?

    The banker said something about me not having any other assets being an issue? But if the numbers work what's the issue? I was already prequalified for this loan putting in my offer and all of the sudden there is a problem. My min credit fico score is above 660 and I have been employed for over 2 years.

    Alternative financing options or suggestions would be appreciated as I don't want to loose this deal. Also for what it's worth It'd be a owner occupied home.

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  • David Beard
    Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes
    15y

    I feel your pain, Marlan. Sounds like you're dealing with an inept loan officer and/or underwriter, or both, if they pre-approved you at this level and now recanting.

    There are requirements to have 6 mths PITI on your subject property remaining in liquid assets (after paying your down payment, closing costs, and funding escrows), but this would be a small amount, certainly way under your 13k, so I'm puzzled. Also, for this purpose, 401-Ks and other retirement assets typically qualify. [Is your 13k what you'll have left AFTER you leave the closing table?]

    I would jump down their throats to find out very specifically what FNMA rule they think they're following, and go from there.

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