FHA or Home Path from Fannie Mae – which home loan program is better? And most importantly – why??
Let’s take a look:
First of all, they both allow home buyers to buy a home with a low down payment and fairly liberal qualification guidelines, so both mortgage programs are a great way to buy a home!
FHA and Home Path
If you purchased a $250,000 Single Family Home with FHA financing, your down payment would be $8,750. Your loan amount with the Up Front Mortgage Insurance Premium (UFMIP) would be $ 243,662.50.
As of today, the interest rate would be about 1% lower than a Fannie Mae Home Path Loan. Advantage FHA? Not so fast!
Because FHA adds the monthly FHA Mortgage Insurance Premium to the payment, the FHA interest rate is effectively 0.90% higher than it appears, and this amount is not tax deductible.
So far, the FHA and the Home Path effective rate end up abut the same.
Home Path offers 97% financing, so the down payment on the home loan would be $7,500.
FHA allows for 96.5% of the purchase price to be financed, so again, the differences between the two home loan programs are minimal.
Home Path does not have the Up Front Mortgage Insurance Premium $242,500 – neither the amount paid in escrow nor the monthly add on amount. In addition, HomePath Loan does not require you to get an appraisal – saving $500 to $600.
One advantage shared by both FHA and Fannie Mae Home Path home mortgage programs are lucrative Seller Credits, reducing the amount of your closing costs by as much as 6% of the purchase price – provided you know how ask for them!
With either of these home mortgage options, make sure you get a lender who is very familiar with these programs. Ask your Certified Home Path Lender for more information about Home Path Loans, then see how it compares with the program offered by an experienced FHA mortgage provider.
Whether you choose FHA or Home Path really depends on you!
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