If you’ve spent any time at all on the web researching the financing of investment property, odds are you’ve read Fannie Mae’s Homepath program will allow investors to purchase property for as little as 10 percent down.
This is good news, right?
Yes and no. Because every time you read that, there should be asterisks telling you to read the fine print at the bottom of the page. The teeny, tiny print that you can’t read without a magnifying glass or a great pair of cheaters.
Fannie Mae’s Homepath and Homepath Renovation financing is available on some, but not all Fannie Mae owned properties.
The perks of using these loans are many. For both owner occupants and investors, benefits include no mortgage insurance, no appraisal fees (Fannie Mae has an appraisal done before listing the property), flexible mortgage terms (fixed interest or ARMs), and a bit more leniency on FICO scores.
But what they don’t tell you is just as important.
Fannie Mae requires an investor to put just 10 percent down on single family homes. However, it’s important to note that buyer can have no more than four mortgages total, including that attached to any personal residence or vacation home.
For an owner occupant of a single family home, the offer is sweeter yet. Fannie Mae’s Homepath down payment requirement for them is a half point lower than FHA’s at 3.5 percent.
Here’s the kicker. When it comes to duplexes, the rules change for everybody.
According to Dean Schiffler of PHH Home Loans, both owner occupants and investors are required to have a 20 percent down payment when using Fannie Mae Homepath financing. Homepath triplexes and fourplexes require a 25 percent down payment.
And, if an investor owns more than four properties, he or she is required to make a 25 percent down payment.
Of course, if you intend to owner occupy your duplex, using Homepath doesn’t make any sense. After all, FHA only requires you to have 3.5 percent down.
This is a good lesson. After this lending crisis, it’s important we all remember to read the fine print.