HomePath Renovation Loan or FHA 203K Streamline Loan?

With so many Arizona Foreclosures and short sales that have been abandoned currently in the Arizona real estate market, the question begs to be asked, “How does a buyer go about getting qualified for the most popular loan used today, a FHA Loan?“

If you have your sights on a home that is missing appliances or lighting fixtures and the house “needs work” then chances are that a traditional FHA Loan might not work.

With the housing market primarily REO’s (Real Estate Owned or also known as banked owned foreclosed properties) then chances are you will come across a property that will need some work and in order to have the home be FHA qualified then these missing items and/or repairs need to be addressed.

Often times, first time home buyers are able to get the required minimum down payment but nothing more!  All’s not lost according to Justin McHood with Arizona Mortgage Team.

“You do have options,” says Justin.  Determining which option fits your scenario would be best determined by your loan officer and what loan program you choose.  Also, perhaps if Fannie Mae owns the property or if someone other than Fannie Mae owns the property.  There are currently two options according to Justin, the FHA 203K loan and the new Fannie Mae HomePath renovation loan.

They are very similar programs says Justin, yet he believes that the HomePath renovation loan has more advantages over the FHA 203K streamline program because of the lesser requirements.

Justin shares the highlights below of both loans FHA 203k Streamline or HomePath Renovation Loan?

FHA 203k Streamline Loan

Highlights:

The FHA 203k streamline loan has been around for years – but with recent numbers of bank owned properties being bought that need a little work, this loan program has become hot again. Some of the highlights of the FHA 203k streamline loan include:

• It works like a construction loan – you are able to buy a home that wouldn’t qualify for FHA financing and finance the repairs that will bring it up to FHA standards
• The total amount of the loan is the purchase price plus the amount needed for repairs
• FHA has limited the Streamline 203K program to a range between $5,000 and $35,000
• The requirements to qualify are the same as a traditional FHA loan
• The construction phase can’t begin until the loan closes. The funds to pay the contractor come from escrowed funds at the closing
• Up Front Mortgage Insurance Premium and Monthly mortgage insurance are paid to FHA just like a regular FHA loan
• Appraisal required

Fannie Mae HomePath Renovation Loan

Highlights:

The newest loan program for homes that “need a little work” is the Fannie Mae HomePath Renovation loan. The HomePath renovation loan is only for homes that are currently owned by Fannie Mae and you will qualify to get the HomePath loan through Fannie Mae as well. Because Fannie Mae currently owns so many homes, this is one way that they are helping people get into homes (they are also offering investors the HomeStyle renovation loan program) when the home may be in need of a few minor repairs. Some of the HomePath renovation loan program highlights include:

• Financing to fund both your purchase and light renovation
• Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
• No mortgage insurance

With the inventory of homes so high at Fannie Mae, it is no wonder that they came out with this great program. I wouldn’t expect it to be around forever – so don’t be surprised if the program goes away once Fannie Mae sells many of the homes it currently owns.

So which loan program is right for your situation? The easy way Justin explains it is something like this:

• Is the home owned by Fannie Mae? If yes, get a HomePath Renovation loan.
• Is the home owned by someone other than Fannie Mae? Time to look into qualifying for a FHA 203k loan.