The other day, I got a call from a prospect who asked about Fannie Mae's HomePath program and wanted to know if I offer it. I answered I did and immediately went into my "HomePath speel" of where I educated the prospect about the benefits and challenges of this particular loan program.
Then he indicated that he saw a property he liked and wanted to buy it. Something about the caller and the things he was saying got my red flag sensors up, which always prompts a barrage series of questions to learn what the prospect's true intentions are.
I come to find out that the prospect has already been pre-approved for a loan with another lender and has been working with another MLO for several months. Furthermore, the caller was already in escrow on a condo. The reason he was looking for another lender is because his MLO wouldn't honor the pre-approval that he had previously issued to him several months ago.
A few more questions later, I discover that the approval was based on an SFR with no HOA's and that it was for a standard FHA loan product and not a HomePath loan for a condo. Needless to say folks, comparing pre-approvals for these two loan products is akin to comparing apples to oranges.
When I explained the differences between pre-approvals for these two loan programs and explained why the MLO probably couldn't honor the pre-approval he had issued, the caller became upset and refused to see or try to understand the differences.
Furthermore, when I looked up the complex of where the condo was listed, not only was it not on the FHA approved condo list, it also wasn't on the Fannie Mae approved condo list. Yes folks, that's right, Fannie Mae has their own approved condo list.
When I tried to explain to the caller why he wasn't going to be able to buy a condo in this complex regardless of what kind of loan program he used, he started ranting and raving about why would HomePath advertise their "First Look" program as an advantage for people to buy if no one could get a loan.
Well folks, he had me there; I didn't have an answer to his question. Having run up against this issue before about why the condo complexes where Fannie Mae has HomePath condos for sale are not on the Fannie Mae approved list, I've always been told to request to have it added and they will see if it qualifies. SEE IF IT QUALIFIES??? SERIOUSLY???
If they want owner occupieds, especially those using NSP funds (the whole purpose of "First Look") to purchase their "First Look" condos, the least they could do is put those complexes on their approved condo list.
I informed the caller that even if his MLO could get Fannie Mae to include the complex he wants to buy in on Fannie Mae's approved condo list there is still the issue that he may still not qualify because the rates for the HomePath program are much higher than FHA rates and that the HOA fee does need to be included in his debt to income ratio and if it is over 45%, then he is going to have trouble getting approved. I suggested he go back to his MLO and try to see if they could work something out about maybe getting an exception or perhaps structuring the loan a little differently. 
While I can certainly understand this person's frustration of having looked for a home to buy for several months and not getting any of his offers accepted until this condo and now he may have to start all over again, I tried to assure him that there are new properties coming on the market everyday and if he can just hang in there, he will eventually find something.
As an MLO, I need to be able to offer this program to my clients and prospects but in doing so, I make sure they understand the challenges of this loan program besides the benefits, which are most certainly not free; borrowers pay heavily for these benefits.
I am not a fan of this loan product, HomePath, and do not think it is a viable loan option for most buyers, at least not an affordable option unless it's pared with a down payment assistance (dpa) program. However, the issue with this is that most dpa programs have their own condition overlays and requirements and it's been my experience that many HomePath properties are fixers.
Until condo complexes start improving their standing, they are going to have more and more renters in those complexes and no one will ever be able to get a loan to buy a condo in those complexes.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Donne Knudsen
Realtor® - CalState Realty Services
DRE#: 01364050 / NMLS#: 249822
805.2069123
Serving low-medium income individuals and families as well as first time buyers with both their real estate as well as their mortgage needs including down payment assistance
Los Angeles County -- Ventura County
© 2010 - All Rights Reserved
It is a shame that borrowers have to jump through so many hoops. It makes no sense whatsoever.
I actually do quite a bit of HomePath financing. For HomePath properties, Fannie doesn't require a condo approval. We only need a copy of the Master Liability Insurance, HO-6 policy, and Fidelity Bond. Fannie doesn't require that we get a condo questionnaire completed. I do know that some lender have their own additional overlays to this though, but these are the Fannie minimums.
Jane - It's become a regular circus with some transactions. It's amazing that some loans can even get closed.
Rodney - After explaining the program to all of the people who ask me about it, no one has ever chosen to do this loan except one client. He was adamant about buying this one particular HomePath house (thank GOD it wasn't a condo) and the LA would not accept any other financing except HomePath. The transaction was a royal pain, my client over-paid for the property and several times during the transaction, my client kept asking me why I let him do this. SERIOUSLY!!!
Anyway, as I mentioned, I am not a fan or advocate of HomePath and really do not think it is a viable and/or affordable home loan option for many buyers. I just wish that LA's would start accepting other forms of financing for HomePath properties.
Thx for stopping by folks; I really appreciate it.Donne - Some lenders pull the wool over the eye of the prospective buyer. "Yes I can give you a pre-approval NO problem".
They do not explain everything about the loan, as I see you do, and don't offer other products. Or they mislead.
Good explanation of the programs. NSP, Home Path, Fannie Mae, Freddie Mac. The client is in good hands with you.
Ken - I actually sent the client back to his MLO because I actually think the other MLO wasn't trying to mislead the borrower. The borrower told the MLO he wanted one program and then he went and made an offer on a property that required a completely different program.
FHA and HomePath are two very completely different loan products. While HomePath does have some great benefits, they don't come cheap. HomePath charges heavily for condo financing with a minimum down payment, which is what this particular buyer was planning to do. Based on that, this buyer qualified for much less than he did if he purchased an SFR with an FHA loan. For this particular buyer, HomePath is not the best loan option.
Thx for stopping by; I really appreciate it. :)
Hi Donne, in South Fla it is terrible when it comes to condo approvals. They are in a slippery slope. My mother in law finally has an offer accepted on a condo that IS FHA approved, but we come to find out there are 24% of the units in default. That is 13 units and we need to get that number down to 8 units. We can do this if the HOA would COOPERATE, but I guess they don't want to make money.
I don't have much experience with Homepath, but the little I have seen tells me to STAY AWAY! LOL...
Phil - Condo financing around here is pretty grim too. As for HomePath, I have had dozens of prospects call me about it asking about getting pre-approved for it but everytime I begin talking about the benefits and challenges and start going over rates and adjustments (and there are a lot of adjustments), every single person has then decided they weren't interested, except one.
That particular client had his heart set on a particular HomePath property and that transaction was challenging. Even though the property was over-priced compared to the recent comps, he still wanted it. Even though the home inspection discovered numerous problems and issues, he still wanted it.
Working with the HomePath LA was a total pain in the @$$ and afterwards, even though my client still liked the property, he wished he hadn't gone HomePath. I've said it before and I'll say it again, I do not like this program and do not think it's a good program for most buyers. All-cash investor - yes but first-time buyer - absolutely not.
While it seems like some of the more recent HomePath properties are looking a little better, around here most of them haves some serious deferred maintenance and they're all over-priced compared to recent neighborhood comps. JMHO