South Bend Home Loan

Thursday, April 17, 2014

Getting Creative In A Tight Market

Sadly, I'm working with a lot of frustrated home buyers right now.  They want to buy a home.  They're fully preapproved and READY to buy a home.  They just can't find a home.

The Michiana market has had a strong shift in the last 60 days and we now find ourselves with a serious lack of homes for sale.  When a good home goes on the market, it is often selling in days, many times with multiple offers.  Buyers are needing to be quick on the draw.  If they're not, they're finding that the attractive homes are gone before they can even schedule a showing.

This is leading buyers to look at options they typically wouldn't have considered.  Two options that I've had multiple questions on lately are the HomePath Mortgage and the FHA Streamline 203k.

HomePath Mortgage

So what is the HomePath mortgage?  HomePath mortgages are mortgages available to someone who is buying a Fannie Mae foreclosure.  A list of these properties can be found at

Typically, someone can still buy a Fannie Mae foreclosure without using HomePath financing.  Most of these homes are also available with regular conventional financing or FHA.  HomePath is just another mortgage option offered on them that has some unique perks.

One perk of HomePath mortgages is that the down payment is only 5% but there is no mortgage insurance charged.  This can be misleading to buyers though.  They think this means they will pay less for the home.  True, there is no PMI, but the interest rate is higher so the payment typically is about the same. 

The second big perk (and my favorite) is that no appraisal is needed.  One of the biggest challenges with many foreclosures is that the condition of the home is too poor and the lender won't lend on it.  With HomePath, this doesn't come up.  Because the lender doesn't get an appraisal, they know nothing of the condition. The buyer gets to be the one who decides if the condition is acceptable to them with no input from the lender.

HomePath financing comes in two flavors - regular HomePath and HomePath Renovation.  Few lenders offer the Renovation option (I don't) but it does exist.  The website provides lists of lenders to contact if that interests you.

FHA Streamline 203K

For me, renovation financing is best done with the FHA Streamline 203k loan.  This is a FHA loan that allows a buyer to buy a home and roll the costs of repairs to it into their new mortgage.

It's a great option that is highly under-used.  The reason it's under-used is because most lenders and Realtors are afraid of it.  They've seen it go horribly wrong and they don't want to subject themselves or their clients to that.

It can go horribly wrong, but it also can go wonderfully right when managed by a lender who understands it thoroughly and knows how to structure the process so that it flows as it needs to.  If a buyer is willing to invest a bit more time upfront to get educated on the pros and cons of this program and if they're willing to invest extra time during the process to work with contractors for the planning and completing of repairs, this option can help them turn the home that others are passing on into a home that others will envy.

Exploring Options

When inventory is low, buyers definitely will benefit from being open to different options. The HomePath mortgage and FHA 203k are two very good ones, with the 203k being the one that typically offers the most potential for the right buyer.  To learn more about how these options could help you or your client get into a home now, give me a call or drop me an email today!

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.

Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.