Using HomePath for a first investment property

[Kyle M Miller]

Hi folks,

I've been reading a bit about HomePath (by Fannie Mae) and trying to get a sense of what experienced investors think of it as a starting point for new investors.

www.homepath.com

Why my wife and I are considering itL

• 10% down payment
• No requirement for using it as a primary residence

The properties seem to be in various states of disrepair (some of them mostly cosmetic) which doesn't scare us, we can source contractors and do cosmetic work ourselves. Inventory is low in our area, but we have time on our side to keep an eye out.

Also, there seems to be confusion around HomePath vs HomeStyle; from what I gather online they're not the same thing, but some people here insist that they are. Any clarity here?

We'd love your thoughts on a new investor considering HomePath as an option to keep up front costs low and get us started more quickly.

Thanks in advance!

[Michael Noto]

@Kyle M Miller Homestyle is Fannie Mae's version of a renovation loan similar to a FHA 203k loan which I am sure you have heard of. Homepath.com is a website where Fannie Mae lists their foreclosure inventory.

Personally I think buying a HUD home or a Fannie Mae Homepath home are a great way for beginner investors to house hack a property. If you listen to this weeks BP Money podcast with @Scott Trench and @Mindy Jensen, Scott describes using this strategy as a "cheat code" and I agree with him because of these reasons:

• The exclusive owner occupant bidding period for these homes gives you access to purchase properties you would never be able to purchase if investors also had access. This is a major advantage. HUD and Fannie both have these first look periods for owner occupants.

• The low down payment options (3.5-5%) gives you the ability to buy at a price point you probably would not be able to if you were buying at 25% down with a non-owner occupied investment loan. The by-product of expanding your price range is you should be able to buy in a better neighborhood than you would otherwise. This is great for comparatively expensive markets like the one we have here in Connecticut or maybe even where you are in Washington.

•  If done correctly, in the end after the renovation is completed you should have equity in the property and have taken care of a lot of the deferred maintenance with the rehab funds loaned to you. This is important because not only are you saving money on your living expenses by house hacking, but you should be able to build up your reserves even more because that deferred maintenance was done during the rehab phase. This is an aspect of using the renovation loan that I think people overlook and is a major benefit.

I could go on and on about the advantage of these rehab loans as you can tell. I think they are a fantastic product. My clients have had a lot of success with them over the years.