Fannie Mae Homepath Financing versus FHA

houseIf it sounds too good to be true, it probably is.  Fannie Mae homepath financing versus good old FHA.  Thanks for the comparison, Bob.  Call Bob to learn more about financing a home and call me, Chris Henry, to help you find the right home for you.

Fannie and Louie-Made for Each Other. . . .

You know both of them, although Louie may have faded somewhat from memory.  The Fannie I’m referring to is of course Fannie Mae, the quasi-governmental provider of low fixed rate mortgage money.  The not so ubiquitous Louie I’m referring to is Louie Depalma, played by Danny Devito, the malevolent manager on the 1980’s sit-com, Taxi.

If you remember, if you wanted anything from Louie, he’d hold his hand out insisting you hand him a buck.  Another favor,  another buck.  Fannie Mae has taken Louie’s lead in their loan pricing as well.  A great example of  Louie’s technique is  seen in the pricing of  Fannie Mae HomePath  mortgages.

You’re probably aware that Fannie Mae offers special financing on their REO portfolio.  It can be a pretty sweet deal.  No appraisal and no PMI.  Less known is the “Louie factor”  Homepath employs.

A lot of prospects call me for the Homepath 97% loan, but when I explain that to save the 2% down payment (equity) over a 95% Homepath they have to pay an extra three quarters of a point (or an additional eighth to a quarter on the rate), they recognize the 97% loan for the “nail-down” that it is.

Here are the basics regarding HomePath pricing:  an owner occupied 80 is the same pricing as a standard Fannie loan.  85% is a half point more which equates to an eighth in rate.  90% is .75, a pretty good value.  95% is 2.5 points, a pretty stiff “no PMI” alternative.  Then the 97% nail-down loss leader, at the 3.25% point premium.

Like Louie, Fannie doesn’t stop there.  If a HomePath buyer’s credit score strays below 740 to say 739, it’s another half point, at 719 or below, a full point hit. If your buyer strays into the score territory of many FHA buyers, 640-660, it’s a hit of 2.75 points, making Louie Depalma look like the Bill Gates Foundation.

Consider that FHA, maligned for its’ recently and pending further MIP increases remains at a 96.5% loan, doesn’t charge and extra cent for credit score unless the score is under 640, and even at 620, charges only a half discount point premium, not even an eighth in rate equivalent. Throw in assumability, full gifting, non-occupant co-borrowers, and more ratio flexibility along with the fact that FHA pricing starts out almost a half point in rate cheaper, (Homepath or not!) than Fannie Mae (as well as her bro, Freddie Mac) and you can see why I remain an FHA fan and proponent for all but the most qualified borrowers.

If you’re ever not sure which way to structure a transaction, don’t pass the buck, call me!

Robert Saltzman-EverBank Branch Manager, NMLS # 274176 M.813-787-7711 T. 813-637-2488 F. 813-364-7230

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Chris Henry