HomePath Mortgage, A Fannie Mae Foreclosure Financing Program

When foreclosures happen and Fannie Mae is the investor on the property they offer the HomePath Mortgage in order to sell properties in a timely manner and minimize the impact on our Arizona communities.

As of June, 2011 there are over 3,600 houses available in Maricopa County, Arizona under this program.  Fannie Mae extends the 3.5% closing cost assistance for owner occupants through October 31, 2011.

Program Guidelines:

• Flexible Mortgage Terms-Fixed Rate, Adjustable Rate and Interest Only
• You may even qualify if your credit is less than perfect
• Available to Owner Occupiers, Second Homes and investors
• The minimum down payment required for this type of loan is 3% of the sales price for owner-occupied properties and 10% for home buyers purchasing a second home. Real estate investors and non-owner occupied buyers are required to put a minimum of 10% of the sales price down.
• Down Payment (at least 3% of selling price) can come from your own savings, gift, grant, or a loan from a non profit organization, state or local government, or employer.
• NO mortgage insurance*
• NO Appraisal Fees-Selling Price is the appraised value Also available for HomePath Renovation Mortgage (see below)

Terms for a HOMEPATH MORTGAGE:

Adjustable Rate Mortgages: The adjustable rate mortgage (ARM) is a home loan whose interest rate and payment are adjusted periodically throughout the life of the loan. Though the initial interest rate is lower than traditional 30 year fixed rate mortgages (also known as a "teaser rate"), the actual interest rate is dependent upon several factors:

The index: This is the published market rate of the 1-Year London Interbank Offering Rate (LIBOR). The margin: This is a set percentage that is added to the index to calculate the current interest rate. Margins will vary from ARM to ARM.

The caps: Interest rate caps protect the consumer from wild shifts in interest rates changes from one payment period to another. There are two caps that a borrower should look at: 1) the adjustment cap that limits how much the interest rate may increase or decrease between each adjustment; and 2) the lifetime cap that limits how high or how low the interest rate may be over the life of the loan. All 3/1's: Initial -2% up/down; subsequent - 2% up/down; Lifetime - 6% up. On 5/1's; DU Approved: Initial 5% up/down; subsequent - 2% up/down; Lifetime 5% up. DU Expanded Program: Initial 2% up/down; subsequent 2% up/down; Lifetime - 6% up. Change Dates: 3/1: The first Change Date is the 36th payment due date. There is a new Change Date every 12 months thereafter. On a 5/1: The first Change Date is the 60th payment due date . There is a new Change Date every 12 months thereafter.

Conversion Option: None Though many consumers are initially wary of a mortgage whose interest rate can increase during the life of the loan, there are many situations where this type of financing is advantageous for a home owner. First, if the borrower anticipates an increase in income in his/her future, the ARM may allow the buyer to purchase a larger home than he/she would have normally qualified to buy. Second, ARMs allow a borrower to take advantage of declining interest rates due to the declining index without the expense of refinance the mortgage. Third, ARMs allow home buyers to spend less on interest costs if he/she plans on living in the home for less than five years. Fourth, if the borrower pays additional principal each year towards the loan, the future payments are calculated upon the lower principal amount rather than the original loan amount. In time this may translate into lower monthly payments and/or lower interest costs. The major drawback remains the potential for a higher interest rate which results in a higher monthly payment in the future. 3/1 LIBOR ARM and 5/1 LIBOR ARM's are available on this program. Appraisal: There is NO appraisal required. The value of the property is determined by the sales price.

Assumability: Fixed rate loan is not assumable. Adjustable rate loans are subject to conditions, fees and rate adjustment.

Bankruptcy: Required a 4 year elapsed time period after bankruptcies have been dismissed or discharged. (or a 2 year elapsed time period in the case of bankruptcies that have been discharged following successful completion on a Chapter 13 plan.) OR 2 years elapsed time period after Bankruptcies have been dismissed or discharged due to Extenuating Circumstances. Required 5 year time period for borrowers with multiple bankruptcy filings in the past 7 years. An explanation of the bankruptcy will be required. Furthermore, the borrower should have reestablished credit (i.e. auto loan, secured credit card) with NO late payments.

Cash Reserves: The borrower is required to have a minimum of two months cash reserves in the bank by the close of escrow. Non-owner occupants may be required to have a total of six months cash reserves.

Credit Scoring: Fannie Mae requires a minimum credit score of 660. Credit Score can be as low as 620 with more money down. 

Down Payment Requirements: The minimum down payment required for this type of loan is 3% of the sales price for owner-occupied properties and 10% for home buyers purchasing a second home. Real estate investors and non-owner occupied buyers are required to put a minimum of 10% of the sales price down.

First Time Home Buyers are OK

Fixed Rate: The conventional 30 year fixed rate home loan is a mortgage in which the monthly payments remain the same over the life of the loan. Once the mortgage is in effect, the interest rate does not fluctuate but remains constant. The 30 year fixed rate loan is one of the most commonly used mortgages for residential financing in America. The greatest advantage for a home buyer is the predictability of the payments each month because it never changes. This type of loan is often recommended for home buyers living on a fixed income, a set budget, or those planning on living in their home for more than five years. If interest rates increase, the loan rate will remain the same. Unfortunately should rates decline below the set interest rate on the loan, the only way to change it is to refinance the mortgage and incur a loss of equity or additional closing costs to take advantage of the lower interest rate. Fixed rate loans can be done in 10, 15, 20, 25 and 30 year terms. The less the term the higher the payment but lower is the rate of interest.

Foreclosures: Established a 5 year time period to reestablish credit following a foreclosure and a 2 year time period following a pre-foreclosure sale with extenuating circumstances.

Income and employment: There are no limitations placed upon income requirements. As for employment, there are no limitations on a specific length of time at a particular job. However, a 2 year history is required, preferably in the same line of work (education can be counted towards this 2 year history if it is for the same profession the borrower is currently in). Will also look to see that your income source/employment is likely to continue for the next three years.

Interest Only Terms: A promissory note that require that only the interest be paid during the term of the note and the payment of the principal amount at the end of the term. Interest only loans can be done in 30 year fixed, 3/1 and 5/1 ARMS.

Interested Party Contributions allowed and include funds contributed by the property seller, real estate agent/broker, mortgage lender, or any other party with an interest in the real estate transaction. Interested Party contributions may be used exclusively to cover closing costs and prepaid expenses.

**Max allowable IPC limits within this document supersede max as indicated within specific product guidelines

Loan to Value: The loan-to-value ratio (LTV) is probably the most important of all the ratios when deciding to approve a mortgage. The lower the LTV ratio the safer the loan is for a lender. The reason is that the lower the LTV ratio, the higher the equity investment the borrower will have in the property and thus the more the borrower has to lose. Stated as a percentage, the LTV essentially determines the level of risk in the repayment of the loan. Loan to value is calculated as follows: Mortgage Amount divided by Lesser of Sales Price or Appraised Value = LTV Mortgage Insurance: Most mortgage Loans require mortgage insurance for all purchases with a down payment less than 20% of the purchase price.

There is NO mortgage insurance required on this program.

Number of Properties Financed: Borrowers are limited to no more than 4 financed properties.

Pre-payment Penalty: None

Qualifying Ratios: Fannie Mae limit a borrower's total debt (proposed monthly payment plus monthly payments towards credit cards, student loans, car payments, and other installment and revolving credit) cannot exceed 45% of their gross monthly income. If compensating factors are present or if the borrower has an above average credit score, the stated ratios may be exceeded. Remember, you must be prequalified for your home loan before you can submit an offer:

HOMEPATH RENOVATION MORTGAGE: Program guidelines for homes that you make your primary residence only: Financing to fund your purchase and light renovation Flexible Mortgage Terms-Fixed rate, Adjustable rate and Interest Only Down Payment (at least 3% of selling price) can come from your own savings, gift, grant, or a loan from a non profit organization, state or local government, or employer. NO mortgage insurance*

To see houses available on the Homepath Program - go to www.homepath.com

If you have questions on this program or would like to see if you qualify please call 602 993-0000 or email sunnations@cox.net