Fannie Mae HomePath Review

May 23, 2011

foreclosure

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.

This was especially true after scores of borrowers took out low down payment mortgages, only to watch home values sink and deplete them of all their home equity, destroying the housing market in the process.

Fannie Mae Homes for Sale

  • Fannie Mae HomePath
  • Is the program that was created to unload the many homes
  • That are now owned by Fannie Mae due to foreclosure
  • As a result of the massive housing crisis that took place

However, Fannie Mae is 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 to prospective home buyers.

They have thousands of properties nationwide, including single-family homes, condos, and townhouses, including homes geared toward first-time buyers and those for move-up buyers.

Today's Rates

Some of the properties have received repairs and improvements, but all are sold as-is, meaning you still need to do your diligence and inspect the property before purchase.

There is no specific HomePath loan, but Fannie Mae offers special home loan financing on these properties via its “HomeReady Mortgage” loan program.

The HomeReady program offers lower mortgage insurance and pricing adjustments to borrowers who complete homeownership education, which will equate to lower monthly mortgage costs. And you don’t have to be a first-time home buyer.

Let’s take a closer look at the HomePath program and the corresponding lending guidelines to see if this home buying avenue might be right for you.

What Is a Fannie Mae HomePath Property?

  • It’s a foreclosed home or condo
  • That is now owned by Fannie Mae
  • And available for sale by the company
  • To both first-time home buyers and investors

In short, a HomePath property allows prospective home buyers to get their hands on a Fannie Mae property (prior borrower lost it via foreclosure, deed-in-lieu, or forfeiture) with as little as three percent down payment.

Anyone can purchase a HomePath property, including first-time homebuyers, investors, and those looking for a vacation home, but special priority is given to owner-occupants via a First Look buying period.

A real estate agent is assigned to each property available, as they would be with a traditional home purchase. You may use your own buyer’s agent, or contact the HomePath listing agent directly. But you can’t buy the homes directly from Fannie Mae.

In any case, the home buying and mortgage process will be pretty similar to the usual experience, though hopefully more streamlined and with less competition from other prospective buyers.

Aside from the favorable financing options, you might be able to get a deal on a property that you otherwise wouldn’t realize when buying a home through traditional channels.

For those who like the idea of getting a bargain by purchasing a previously foreclosed home, but don’t like the risk and/or uncertainty, HomePath might be the winning ticket. Many of the HomePath homes are even move-in ready!

By the way, similar programs are available for Freddie Mac homes via HomeSteps and HUD-owned properties via HUD Homes, so be sure to check those as well to expand your search.

HomePath Mortgage Financing

  • Financing with as little as 3% down payment
  • 3% closing cost credit if you complete a home buyer education course
  • Only need a 620 credit score to qualify
  • Up to 6% seller concessions for owner-occupied properties
  • Lower mortgage insurance coverage compared to standard requirements
  • Non-occupant borrowers permitted
  • $0 borrower contribution from own funds
  • Multiple financed properties (investors can finance up to 10 properties!)

As noted, you only need 3% down if it’s a owner-occupied property. 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.

This compares to the minimum 3.5% down payment required with an FHA loan, and the typical 5-10% required on conventional loans. There is no required borrower contribution, which is handy for those short on funds.

Additionally, borrowers who need help qualifying for a larger mortgage payment can use a non-occupant co-borrower, as well as boarder income or rental unit income.

Another advantage is that the private mortgage insurance can be canceled, unlike the FHA’s in most cases.

At the same time, HomePath mortgage rates are competitive relative to traditional mortgage rates, despite the flexible underwriting guidelines and low down payment (and credit score) required.

Also understand that most large mortgage lenders, such as Citi or Wells Fargo, are “HomePath Mortgage Lenders,” meaning they can offer you financing via the loan 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 Ready Buyer Program Incentive

  • The HomePath Ready Buyer Program
  • Provides up to 3% in closing cost assistance
  • To buyers who complete an online homeownership education course
  • As long as you’re a first-time home buyer and occupy property within 60 days

Fannie Mae is also currently offering up to 3% in closing cost assistance to HomePath buyers who take an online homeownership education course. This is basically a no-brainer if you’re considering making an offer on a HomePath property.

For example, if the purchase price is $300,000, that’s $9,000 toward closing costs that you’d otherwise have to pay out of pocket or absorb via a lender credit. And the $75 course fee is also recouped via the credit!

It takes most individuals just four to six hours to complete, so if your time is worth that (it better be!), it can certainly sweeten the deal and make the dream of homeownership more of a reality.

It’s also easy to claim the credit. Once you complete the course, you simply attach a copy of the completion certificate to the initial offer. But make sure you take the course early on so there’s no delay in making your offer if you happen to find a home quickly.

Additionally, note that you must be a first-time home buyer, meaning no ownership in the past three years. And you must reside in the property as your primary residence within 60 days of closing.

If your closing costs are less than 3% of the purchase price, you won’t receive the difference.

Those who plan to use the property as their second home, or as investment properties are excluded from the credit.

HomePath First Look Period

  • The First Look period
  • Allows owner-occupants to make an offer on a HomePath home
  • Before investors are able to
  • Typically the first 20 days of property being listed (30 days in Nevada)

Another snazzy feature to HomePath is the “First Look” 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 First Look period is the first 20 days (30 days in Nevada) the property is listed on HomePath.com, which gives owner-occupants a nice little head start in front of investors.

When conducting a property search for homes owned by Fannie Mae, you’ll see a little “countdown clock” on the page that details how many days remain to make an offer during this period.

Some non-profits and public entities are also able to take advantage of the First Look period.

Oh, and all offers for HomePath properties are made online, which makes the home buying 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.

Update: This feature appears to be no longer available.

Final Word on HomePath

  • If you’re looking for a home or condo
  • And having a hard time finding an affordable property
  • Consider HomePath alongside your regular home search
  • To expand your reach and potentially find a property outside the box

In summary, Fannie Mae 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 low down payment requirements, plenty of mortgage options, and flexible underwriting guidelines, you could save some serious cash and increase your chances of loan approval, especially with the huge closing cost credit.

So HomePath properties and the corresponding easy 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 and hire a home inspector!

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.


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