Government mortgage financier Fannie Mae offers special home loan financing via its “HomePath” program, so let’s take a closer look.

In short, a HomePath mortgage allows prospective homebuyers to get their hands on a Fannie Mae-owned property (foreclosure) for as little down as three percent down.

And that down payment can be in the form of a gift, a grant, or a loan from a nonprofit organization, state or local government, or an employer.

This compares to the minimum 3.5 percent down payment required with an FHA loan.

HomePath financing comes in the form of fixed mortgages, adjustable-rate mortgages, and even interest-only options!

Another big plus associated with HomePath financing is that there is no lender-required appraisal or mortgage insurance.

Typically, private mortgage insurance is required for mortgages with a loan-to-value ratio over 80 percent, so this is a pretty good deal.

HomePath® Buyer Incentive

Fannie Mae is also currently offering buyers up to 3.5 percent in closing cost assistance through June 30, 2011.

But only those who plan to use the property as their primary residence as eligible – second homes and investment properties are excluded.

Finally, many condominium projects don’t meet Fannie’s guidelines, but if the condo you’re interested in is owned by Fannie Mae, it may be available for financing via HomePath.

Note that most large mortgage lenders, such as Citi or Wells Fargo, are “HomePath Mortgage Lenders,” meaning they can offer you the loan program.

Additionally, some of these lenders work with mortgage brokers, so you can go that route as well.

Final Word

In summary, HomePath might be a good alternative to purchasing a foreclosure through the open market.

And with flexible down payment requirements and no mortgage insurance or lender-required appraisal, you could save some serious cash.

So HomePath properties and corresponding financing should certainly be considered alongside other options.

But similar to other foreclosures, these homes are sold as-is, meaning repairs may be needed, which you will be responsible for. So tread cautiously.

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