Fannie Mae HomePath
Fannie Mae, or The Federal National Mortgage Association , is a government-backed organization set up to provide liquidity to the mortgage industry and increase the number of affordable homes available. They run several schemes to help people that are struggling to purchase property, and HomePath is one of those schemes.
In some cases, if a buyer is unable to afford their mortgage, Fannie Mae takes ownership of the property. The HomePath scheme was set up so they could sell these properties to buyers at a lower-than-average price in an attempt to increase residential property availability.
You can find a wide range of different homes from traditional single-family dwellings to farmhouses and condominiums. They're available in a range of locations and most offer excellent affordability for buyers.
If you sign up for the HomePath scheme, you benefit from reduced closing costs, down payment assistance, and lower interest rates than traditional mortgages. In some cases, you can purchase a property with a certain down payment and you may qualify for closing cost reimbursements too.
All homes sold through the HomePath scheme are sold 'As-Is', which means that no work is done on the property before they are sold. It is the responsibility of the buyer to carry out any repairs and maintenance after they move in. The condition of the homes will vary a lot so this can be an issue.
How Does The HomePath Process Work?
Before deciding whether buying a property through Fannie Mae HomePath is right for you, it's important to understand how the process works. There are also specific requirements you have to meet before you are eligible for a HomePath property.
HomePath Requirements For Buyers
To get a HomePath property, you must be able to document your income. You should have a steady source of income from full or part-time employment and take out the loan with your primary residence only. The total debt should not exceed a certain percentage of your monthly income either.
When it comes to finding a home loan to purchase the property, you can use a USDA loan or a VA loan. This means that you can get funding for homes located in rural areas or purchase a home that is subsidized by the Veterans Administration.
There are also certain types of loans that are not allowed under the HomePath scheme, so it helps to have an idea of which type of property you want before you apply. For example, if you plan to purchase a condo with Fannie Mae HomePath, it has to be approved by HUD or FHA. This means that you might want to verify first the loan product(s) before you make your offer.
You do not have to be a first-time buyer to qualify for the HomePath scheme but you will probably only get your closing costs reimbursed if you are a first-time buyer, however this is subject to change. But according to Fannie Mae what is a first-time buyer? They consider anybody that hasn't owned a property in the last three years a first-time buyer.
If you want to buy a property through HomePath, you have to show that you plan to make it your primary residence and you also need to move in within 60 days of closing the sale.
When you purchase a property through Fannie Mae HomePath, the process is different from a normal house purchase. There are extra steps you must take, so you need to be clear on the full process before you get started.
The HomePath Process
Finding a Real Estate Agent
Firstly, you need to find a real estate agent to help you select suitable properties. You can search online for agents in the area you want to live in and find out who's available, but this doesn't give you any information on what they're like or whether they'll do a good job for you.
To get around this issue, Fannie Mae provides their own list of approved real estate agents and brokers that you can use with the HomePath scheme. This way, you know everyone involved will follow the same process and ensure all steps are followed correctly without any issues.
Fannie Mae will only accept an offer from an approved real estate agent and you are not able to make an offer without having an agent. If you source your own real estate agent, it's important to make sure that they understand the process and know how to submit the offer in the right format, or it will not be accepted.
Deciding What You Can Afford
Once you have your real estate agent, you will start looking for a suitable property to buy and the steps on how to buy a house. You can discuss your price range with MortgageQuote.com and find out how much you can afford to spend on a mortgage. You may also utilize the mortgage calculator to help guide you along what your proposed debt-to-income ratio might be around.
They should be able to help you avoid overspending by finding properties in the right area that are in your price range. You must communicate exactly what you're looking for so that your agent understands whether the properties being suggested meet your needs or not.
You also need to assess your finances and determine how much you can afford to put down as a down payment and what monthly payments you can realistically handle. Ideally, your total home costs should not exceed 28% of your monthly income, however some lenders allow for larger debt-to-income ratios. You need to check your finances and do all of the mortgage calculations before looking at properties.
Getting Pre-approved for a Mortgage
While you're looking for a property, seek preapproval from a mortgage lender, such as MortgageQuote.com. This way you can see if the properties you like will work within your financial situation and what mortgage payments you can afford.
If it turns out that these homes are too expensive or unsuitable, adjust your search criteria to find other options. Getting preapproved also helps show the seller of the property that you have financing lined up so they know there's no risk of ending up without a buyer who can close on the purchase.
Working with a mortgage broker near you can help you to compare the different loan options available to you, so you can get the best possible deal. They can also take you through the application process and help you get all of the relevant documents needed for a mortgage in order, meaning that you are more likely to be preapproved for the loan.
Finding a Property Through HomePath
Once you are pre-approved for a loan, you can start looking at the different HomePath properties on offer. The Fannie Mae HomePath scheme has its own online database of properties you can look through. You can do searches based on a number of criteria including location, price, number of bedrooms, and property type.
When you are looking at properties, you will notice that the prices are very competitive. This is because Fannie Mae is looking to get rid of the properties as soon as possible. In some ways, that's great news because you can get an affordable property. However, it does mean that properties can be snapped up quite quickly, so you have to move fast sometimes. If you find something that you like, get in touch with your real estate agent and they can help you set up a viewing.
When you are viewing a HomePath property, pay careful attention to the condition. All of the properties are sold 'As-Is', which means there are likely to be some issues. You need to weigh up the savings you will make by purchasing a HomePath property with the cost of making renovations. Be on the lookout for any major problems like structural problems, roof damage, or other issues that need big fixes. You can get a full list of the problems with the property from your real estate agent so you know exactly what you're dealing with before you buy.
Fannie Mae HomePath properties are HUD-code certified, which means they have been inspected by somebody working for Fannie Mae to make sure that there are no major health or safety hazards in the house. However, that doesn't mean there won't be any expensive problems to fix.
The HomePath Ready Buyer Course
If you are worried about finding an affordable home in a market with expensive property, there is some help available through the HomePath Ready Buyer course. This free online class will help you understand how to use Fannie Mae's programs to buy your own affordable home. It also covers the responsibilities of being a homeowner, including what costs you can expect and when they arise.
This course is compulsory if you want to apply for reimbursement of your closing costs, and it is about $75 to apply, although costs are subject to change. It usually takes between four and six hours to complete the online course. Even if you are not applying for closing cost reimbursement, you may benefit from taking the course if you want to learn more about homeownership.
Submitting Your Offer on a Fannie Mae HomePath Property
When you find a property you are interested in, your real estate agent can help you submit an offer. The process for submitting an offer is much the same as it would be with any other home purchase. However, if you want your closing costs to be reimbursed after the sale and you qualify for this, you should put your request in when you make your offer.
Benefits Of Fannie Mae HomePath
There are a number of clear benefits to buying a property through the Fannie Mae HomePath scheme. They include:
1. Lower property prices - Because Fannie Mae wants to sell the properties quickly, this means somewhat stable and potentially lower prices for you. House prices could always be on the rise and many first-time buyers or low-income families might struggle to afford a house. With the HomePath scheme, you might find the right property at a price that should be fairly affordable. You may also be able to make savings by claiming back your closing costs after the sales.
2. Properties are often in better condition than other foreclosures - Buying a foreclosure can be a risk because the property might be in poor or unknown condition. However, Fannie Mae HomePath properties are often in better condition than other foreclosures. Although this isn't always the case, so you still need to check properties carefully.
3. Simple sale process - When buying a house through HomePath, things are relatively simple because Fannie Mae owns the property. If you were to buy from a private seller, your sale is tied into a chain, which can slow things down. Say, for example, the seller is waiting to move into a new property (property A), before they can finalize the sale and their purchase falls through, everything might grind to a halt. However, if you provide the seller a clear- to-close from your lender on the home you are buying(property B), the seller may provide this CTC to their lender and might be able to close (property A) they are trying to buy, even though they have not sold you the seller’s property (property B). Other words, if the seller of a property is selling their property and wants to buy another property, the seller can buy the new property without ever having sold their current property, thus allowing the seller to move out of their current home and into the new home with ease. However, when you buy directly from Fannie Mae through HomePath, you might not need to worry as much about being part of a property chain as the process can be easier to overcome at times, depending on the lender.
Disadvantages Of Fannie Mae HomePath
Although there are a lot of big benefits to the Fannie Mae HomePath scheme, there are some potential disadvantages that you need to consider before deciding if it is the right option for you. They include:
1. Properties are sold 'As-Is' - The biggest issue with HomePath is that the properties are sold 'As-Is'. Even though HomePath properties are in better condition than most normal foreclosures, it is still likely that you will have a lot of repairs to do. This might be a lot of work and can get expensive, so you need to decide whether you are willing to take the job on.
2. Homes get snapped up quickly by investors - As you would expect, the low prices attract a lot of interest. Although first-time buyers get priority, the HomePath properties are opened up to investors after a couple of weeks on the market. These investors have the capital to snap properties up quickly, so it can be difficult for independent buyers to get the best houses.
3. You will get random locations - As is often the case with foreclosures, they tend to be in random areas and may not be in the area you desire. So, you may have to sacrifice location to get a good price on your home.
What Is Freddie Mac HomeSteps?
Freddie Mac, another government-backed organization, offers their own scheme for selling foreclosures. The HomeSteps Program is open to first-time buyers with low-to-moderate incomes who meet certain credit and employment requirements. It provides some of the same benefits as Fannie Mae's HomePath program, including access to lower market value properties. However, there are additional eligibility requirements that must be met in order to qualify for the program.
There are HomeSteps properties available in all states but in our opinion, the better financing options are limited to just ten states; Alabama, Florida, Georgia, Illinois, Kentucky, North Carolina, South Carolina, Tennessee, Texas, and Virginia. There are plans to open the financing options up to more places in the future, but at the moment, the scheme is relatively limited.
In these ten states, homebuyers can purchase a property with a down payment of just 5% and they can also buy through other mortgage schemes like FHA and VA loans.
Fannie Mae vs Freddie Mac
The HomePath and HomeSteps schemes both aim to do the same thing; make foreclosures available to people that are looking for affordable homes. But are the two different and which is better, Fannie Mae vs Freddie Mac?
The process of buying a property is essentially the same with the two schemes and you will still need to go through a real estate agent with HomeSteps too. The properties are all sold 'As-Is', just like they are if you go through the HomePath program.
The major difference between the two schemes is the availability of improved financing options. Currently, Fannie Mae offers low down payments to any qualifying buyers anywhere in the country when they purchase a foreclosure through the HomePath scheme. However, Freddie Mac still has a limited offering and you can only get the financing options in ten specific states. If you live in one of those states, you should explore both schemes and look for available properties. However, if you do not live in those areas, you are better off looking for properties through the HomePath scheme, especially if you are having difficulty getting the money for a down payment on a house.
The Fannie Mae HomePath scheme was designed to make foreclosure properties available to more people and they have done a great job of supporting first-time buyers and those with low incomes. If you are looking to purchase a property through HomePath and you want to explore your different mortgage options, working with a mortgage broker like Mortgage Quote is the best solution. We can take you through the different options available and explain all of the financial assistance that is offered through the scheme. Get in touch today to learn more about how we can help you get preapproved for a mortgage and purchase a property through the Fannie Mae HomePath scheme.