Fannie Mae HomePath Financing

by Jeff from California

Ask Kate about Fannie Mae HomePath Financing and debt calculations: Hi Kate, Is it true that HomePath financing allows you to purchase sole and separate but now you have to include spouse's debt? I was married last year and am trying to buy a home. My wife had a short sale 2 years ago prior to marrying me and is self employed with a lower than required credit score.



Jeff continues... Although she makes decent money on paper, it looks bad for tax returns and she is dragging my DTI (debt to income ratio) down since for FHA you have to look at her debt but not count her income.

If we are able to buy we will be in a much better situation than we are while renting. Our payment will be less each month pretty substantially. I am nervous and just wanting to confirm that Fannie Mae Homepath Financing allows a spouse to qualify on their own. Thanks!

Kate Answers: Fannie Mae Homepath Financing

Ask Kate at Get-Your-Best-Mortgage-Rate.com

Dear Jeff,

Can they, will they, do they... and that pretty much sums it up.

Here's the real question. Will financing and buying a house sole and separate from your wife without counting her debt be approved under your circumstances?

While HomePath Financing mirrors Fannie Mae's basic underwriting guidelines, there are too many parameters to each loan program to give a reliable answer.

Fannie Mae Guidelines

I think of Fannie Mae guidelines like this - an old fashioned hat rack with several pegs. A downpayment peg, a credit peg, a debt ratio peg, one for appraisal and another for savings. Underwriters are looking for several reasons to approve your loan (which pegs they can hang the hat on).

For example, are you a home buyer with 20 percent to put down? If so, you may get more latitude in one area than someone with a 3 or 5 percent downpayment.

Individual Mortgage Companies

In addition to Fannie Mae guidelines, individual lenders layer their own lending requirements. After a lender approves and funds a HomePath mortgage, they will sell the loan or the servicing to Fannie Mae, in most cases.

But that means they become responsible for the loan, if for some reason they can't sell it. This can make some lenders skittish and prone to underwrite even tougher, especially in today's environment - because they don't want to be left holding the bag, or in my example, the hat.

So it is important to address the question of buying sole and separate when you apply for HomePath financing. Write a letter explaining why you want to buy the property in your name only and why you don't intend to include your wife in the financing.

Include numbers showing how the mortgage can help you financially, for example that the monthly house payment is less than your rent. Do not assume the lender can or will extract that data from your mortgage application.

Understanding Fannie Mae Underwriting

Once I was working with a married couple who had borderline debt ratios. Underwriting was feeling nervous about their application. But when I explained that they were newly weds and prior to getting married were paying separate rents, the new monthly house payment made more sense, even if it was a little higher than the underwriter would have preferred.

Of course, I included both rental agreements and 6 months of cancelled rent checks to verify their combined rents exceeded the proposed mortgage payment.

Shopping for Fannie Mae HomePath Financing

But don't be surprised if the mortgage company seems suspicious. They are trying to weed out potential borrowers who are attempting to defraud them.

Remember, shopping for a HomePath mortgage is no different than shopping for other types of home loans. Talking to a few different lenders will give you a feel for the reaction to purchasing the home sole-and-separate from your wife. Go to 6 Steps to Finding and Comparing Mortgage Lenders on my website for more information.

Comment and Ask Kate

Jeff, one more thing. Is this page is helpful to you? I'd like to hear back from you.

You (or anyone else reading this) can comment on Fannie Mae Homepath Financing. Or Ask Kate another question.

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Income Limit for Family of 4 to Purchase Home with Fannie Mae HomePath Financing
by: Jose from Long Beach, California

Hi Kate, What are income limits for a family of 4 to purchase a home with Fannie Mae HomePath financing?

Hi Jose, Kate here. HomePath financing is available to owner-occupant home buyers and investors purchasing designated Fannie Mae real estate owned (REO) properties.

Why use Fannie Mae HomePath Financing? Just look at these benefits:

1. No appraisal

2. Low down payment from savings, gift, or grant.

3. Fixed, adjustable, or interest-only mortgage programs.

4. No mortgage insurance.

5. Sellers can pay more closing costs on behalf of home buyer compared to other loan programs.

6. Many condominium requirements are waived.

7. Flexible credit history requirements.

To answer your specific question, Fannie Mae HomePath financing has NO income limitations. But perhaps you are looking into a state downpayment assistance program, in which case it could have income limitations.

Of course, you need to go through the mortgage pre-approval process to make sure you have enough income based on your personal finances and debts.

Get more handy first time home buyer tips here.

Best wishes, Kate

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The information you obtain at this site is not, nor is it intended to be, a substitute for financial, lending, real estate, or legal advice. Mortgage rates and trends are published for convenience only, are not guaranteed, and should not be relied upon. Rates vary with no advance warning. You should consult an attorney, accountant, financial planner, housing counselor, mortgage lender, and/or real estate agent, as applicable, for advice and rates regarding your individual situation. Comments and opinions found here are not necessarily those of Get-Your-Best-Mortgage-Rate.com.

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