Some observations:
- It seems one has to have very good credit to qualify for a HomePath loan. People can qualify for FHA and not qualify for HomePath.
- HomePath is cheaper than FHA, even with a higher interest rate, because you do not have to pay mortgage insurance.
My process:
- Find a home you like that qualifies for the program.
- Make a wish list of things you’d like to renovate. It can include almost anything, even appliances.
- Find a lender that is able to do a HomePath Renovation loan. There are not very many of them. I prefer to deal with the bank directly, rather than a broker.
- Get pre-approved. Yes, it’s a hassle, but it can be done in 2-3 days, and, since you have to have good credit to do this type of loan, there shouldn’t be a lot of questions.
- I’m currently right here in the process. Approved but yet to make an offer.
- Have your Realtor make an offer.
- Assuming the offer is accepted, you have 10 days to do a home inspection and get a licensed contractor’s estimates. (These are not required for a regular HomePath loan.)
- An appraisal must be done as if the repairs were complete. The cost of the repairs must raise the value of the home to within 3% of the appraised value. For this reason, you may want to put 5% down, in case the gap between repair cost and appraisal is larger than hoped for.
I found an invaluable/extremely helpful PDF presentation: HomePath Renovation Financing for Fannie Mae REO Properties (large – takes a bit to load).
UPDATE: I decided not to go with the property. It needed a new roof, mold remediation, and some other repairs above and beyond what I was expecting. Back to the hunt.