So, you’re browsing through the online listings of homes for sale in Orange County, and you come across a great little house that says, “No Appraisal Financing!”. Woohoo! That sounds easy…
HomePath
You may have heard of a new Federal home loan program called HomePath. HomePath loans feature several tempting benefits, such as low down payments, flexible terms (fixed-rate, adjustable-rate, or interest-only), low down payments, no mortgage insurance, and no appraisal fees. In fact, you can get a HomePath loan with no appraisal at all!
Why would someone lend you money on a home with out an appraisal to verify the value of the property? Because this feature is only available on Foreclosed homes that Fannie Mae owns. In other words, since Fannie Mae owns the REO, they’re willing to loan you the money to buy it from them without an appraisal – as long as you accept it “AS IS”, with all potential repairs and rehab your responsibility.
Know Your Options
In addition to this one major caveat, there are other reasons you might want to consider something other than a HomePath loan. HomePath loans tend to have higher pricing adjustments that will push your interest rate (and monthly cost) much higher than it would be with a conventional loan, or even an FHA loan with mortgage insurance. If you’re interested in a home that requires major repairs, you can look into an FHA 203k loan – and build the cost of the repairs into your financing.
What’s the bottom line? There is no free lunch, and if it seems too good to be true it probably is, so home buyer beware. The “no appraisal” feature of HomePath loans was designed with a specific purpose of giving buyers flexibility in purchasing Fannie Mae REO’s, but it comes with a cost that may make other programs a better choice depending on the specific situation – on the specific Orange County home that you want to buy. The details matter!
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