At first, I thought it was just another “mortgage scam”. Trust you me, the real mortgage industry always leaves room for the next “million-dollar-idea”. If you pay close attention, you may even end up seeing your next door neighbor on the 6 o’clock news getting caught for selling “ARMS” from the back of his van in a dark alley.

After doing a little bit of research to see the legitimacy of this rumor, I ended up finding the official HUD Mortgagee Letter 2009-15.

Who Can Offer It

Let’s begin with who can offer this “loan” on a loan. (Is that a conundrum?)

According the letter, Federal, state, local governmental agencies, non-profit governmental subsidiaries, and FHA-Approved nonprofits will be able to offer this to home buyers.

How It Works?

Essentially, this is a bridge loan. You are borrowing this money for a short amount of time until you get your tax credit, and then it is paid back to these agencies.

What happens is you are taking out a second lien on your home, and that amount CANNOT be more than:

Down Payment + Closing Costs + Pre-Paid Expenses

Here is a list of some more facts on how this works:

1.) You cannot get any cash back at closing.
2.) You will have a deadline to pay this money back, and if you do not, principal and interest will begin automatically. (What a concept!)
3.) If payments are required, it will be calculated as a monthly liability when qualifying for the loan.
4.) If payments are deferred, it must be for at least 36 months and will not be used against you when qualifying.

I cannot stress to you enough -BE VERY CAUTIOUS with this type of transaction. It leaves so much room for deception, and if you end up in the wrong hands, you may kiss your $8k tax credit goodbye very fast!

While it may bring an influx of new potential buyers to Realtors and open a lot of doors to potential buyers, it is a double-edged sword and I do not particularly agree with it. In my opinion, it can do more bad than good and is basically bringing back “100% financing” and that is part of what has caused the “Mortgage Meltdown”.

I would suggest stopping and thinking as to why many down-payment assistance programs went bye-bye towards the end of 2008. It was simply because more buyers defaulted on those types of loans. The LAST THING we need is the Federal Housing Administration (FHA) getting into financial issues.

Tommy’s 2 Cents:

Use it IF you absolutely HAVE to. The $8,000 is yours one way or another.

- 100% Financing
- NO Credit Score- OK
- NO Job- OK
- NO Heartbeat – OK!

The first sound I emitted was, “Waa Waa Wee Wah!”

Fannie Mae put into effect a new program last month, and is entirely designed for people that are buying REO’s (Real Estate Owned) from Fannie Mae directly. Simply put, when someone goes into foreclosure, many times the bank will buy back the property and are looking to sell these things as fast as they can because they don’t want their “books to get cooked.”

Couple this with a slow housing market, repeat episodes of “Flip This House”, and a dash of paprika, and you’ve got yourself the HomePath program!

So what’s in it for you? Let’s take a look.

For starters, there is NO appraisal or Mortgage Insurance is needed on these types of transactions which can definitely save you some money up front, and thousands throughout the life of the loan. How sweet is that?!

So far, so good…really good! Listen, it gets better…

The minimum down payment is only 3% which can allow several more borrowers such as yourself to get into these properties. Also, if you don’t have enough money for closing costs, HomePath will allow seller contributions up to a full 6% if needed.

Another really neat thing is that there are easier approvals on this program. What I mean by that is even though you have to meet the standard guidelines (620 score, document income, etc), approval types are usually broken up into 3-4 categories. These days, 99% of lenders are accepting only 1; with HomePath, they are accepting ALL types. Bada Bing!

Now before I get blasted in 2011 for promoting this, for the record, I hope this program stays under close watch in the beginning stages because lenders could quickly fall into the hole they are slowly digging themselves out of. Remember, loosey goosey loan programs are what got us in this mess in the first place!

If you’re interested in looking more into this, contact us and I would be happy to go over the HomePath program with you. Also, make sure and do your own due diligence with some Full-Time Realtors that specialize on REO’s.

Happy Hunting!