Home Loans that Make Buying Foreclosed Homes Easier

HomePath loans are a good option for many who want to buy foreclosed homes from Fannie Mae. This special loan type is only available through a few hundred approved lenders in the country, and only on certain properties. For foreclosed homes, this type of home loan has clear advantages.

If you intend to live in the home you're purchasing, you can get a HomePath loan with only three percent down. This type of loan is also available to investors, but they must put at least ten percent down on the property. Your lender won't require mortgage insurance with a HomePath loan, even with a down payment this size. Indeed, you won't need mortgage insurance for any HomePath loan.

HomePath loans don't require property appraisals, which is another one of their clear advantages. It isn't uncommon for conventional loans to be denied due to the appraisal not matching the purchase price and thus, the amount of the loan. HomePath loans don't have this issue. Because the loans are eventually purchased by the entity selling the property, the value of the home is already known to them. This doesn't mean you shouldn't get the home inspected, of course, as you still will want to know what shape the property is in, but you won't have to worry about an appraisal derailing your attempt to purchase the home.

With a HomePath loan, you can also borrow more than the cost of the home if you know you'll need to make repairs. The extra money you borrow -- up to $30,000 above the price of the home itself -- must go to a contractor or other building professional. With a conventional loan, you'll often find that you can't secure a loan for a home that will require repairs to be livable, so if this is the type of house you're looking for, a HomePath loan may be your best choice.

HomePath loans are great for some buyers, but not all of them. To get a HomePath loan, you'll need a better credit score than you would to get a conventional or FHA 203k loan. Although the specific rate will vary based on credit score and down payment size, in general, a HomePath loan will come with a higher interest rate. It's important to remember, though, that without a monthly insurance payment, the higher interest rate may not increase your costs significantly. Often, you'll find that you won't end up paying more, despite the higher rate. Some even end up paying less each month with a HomePath loan than they would with a conventional or FHA loan, despite the higher interest rate.