After the mortgage crisis, government mortgage financier Fannie Mae wound up with a lot of bank-owned homes. They said it themselves; they couldn’t prevent every foreclosure out there.
But they’re not in the business of owning single-family homes or condos, so they’re trying to unload them as quickly as possible by offering all types of incentives.
Fannie Mae also offers special home loan financing on these properties via its “HomePath Mortgage” program, so let’s take a closer look at the lending guidelines.
HomePath Allows Buyers to Purchase Fannie-Mae Owned Properties
In short, a HomePath mortgage allows prospective homebuyers to get their hands on a Fannie Mae-owned property (prior foreclosure) with as little as
three five percent down payment.
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, not just from the borrower’s own savings.
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 in that regard. However, a pricing adjustment in lieu of the mortgage insurance will likely be applied.
In other words, HomePath mortgage rates will be more expensive than traditional mortgage rates to compensate for the lack of mortgage insurance.
As far as the appraisal goes, lenders that finance HomePath properties will rely on the purchase price for the appraised value.
However, it is recommended that you order your own appraisal just to get an independent opinion of the value of the property you are purchasing. It won’t be used by the lender, but it’s good to know what you’re buying.
HomePath Buyer Incentive
Fannie Mae is also currently offering up to 3.5 percent in closing cost assistance to buyers in 27 states who make offers by April 30, 2014 and close on their home purchases by June 30, 2014.
But only those who plan to use the property as their primary residence are eligible – second homes and investment properties are excluded. And the property must be scooped up during the FirstLook period.
Finally, note that 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. This is another plus of the program.
Additionally, some of these lenders work with mortgage brokers, so you can go that route as well if you want to shop around for a low rate.
HomePath FirstLook Period
Another snazzy feature to HomePath is the “FirstLook” marketing period, which gives individuals who plan to occupy the homes first dibs at making an offer.
This can be very beneficial, seeing that investors are typically the first to come along and scoop up foreclosed properties before everyday Joes even know what happened.
The typical FirstLook period is 15 days (30 days in Nevada), which gives owner-occupants a nice little head start.
When scanning the listings, you’ll see a little “countdown clock” on the page that details how many days remain to make an offer. Oh, and all offers for HomePath properties are made online, which makes the homebuying process quick and easy.
HomePath Short Sale Portal
If you’re a real estate agent (or a homeowner), Fannie Mae has made it a lot easier to list and sell short sale properties as well. Assuming Fannie Mae is the first lien holder on the mortgage tied to the property, you can receive list price guidance online.
Once the agent submits a request via the portal, Fannie Mae will order a Broker Price Opinion (BPO) and an appraisal to determine an appropriate listing price.
It will then take Fannie up to three weeks to complete the list price guidance request, after which agents will be able to market the property with a realistic list price that they know will be accepted.
Instead of coming up with a list price they hope will fly, agents (and homeowners) can save a lot of time by going direct to the source and obtaining a definitive answer. This should greatly speed up the short sale process, and best of all, it can all be done from a computer.
Final Word on HomePath
In summary, HomePath might be a good alternative to purchasing a foreclosure in the open market, with a little more peace of mind knowing a big name like Fannie Mae is involved.
And with flexible down payment requirements and no mortgage insurance or lender-required appraisal, you could save some serious cash and increase your chances of loan approval.
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 could be responsible for. So tread cautiously.
I did a few searches on the HomePath website and found that many of the properties were located in hard-hit areas, and not necessarily highly-sought after regions of the country.
It makes perfect sense – these are previously foreclosed properties, so there’s a good chance they’re going to be located in areas ravaged by the mortgage crisis.
Benefits of HomePath Mortgage Financing
- Financing with as little as 5% down payment
- Only need a 660 credit score to qualify for 5% down
- Up to 6% seller concessions for owner-occupied properties
- Up to 90% LTV for investment properties (investors can finance up to 10 properties!)
- No appraisal required
- No mortgage insurance required (mortgage rate will be higher)
- You can also get up to $35,000 to renovate your home with a HomePath Renovation Mortgage
Read more: Do I qualify for a mortgage?