Stealing a home with a HomePath Mortgage
Fannie Mae has a lot of foreclosure properties on its books, and it wants them gone. To unload these homes, Fannie has established the HomePath program and launched a corresponding website that allows you to search for these properties. Furthermore, Fannie is even willing to make some financing concessions to buyers of HomePath properties.
Find a home, snag a deal
Fannie's loss could be your gain. Single-family residences, condos and multifamily foreclosure homes are widely available. Many (but not all) are in fairly new condition, and the HomePath website lets you search easily for homes in your area.
Fannie Mae recommends you check current mortgage rates and get preapproved before shopping for a home. The most desirable homes bring multiple offers, and pre-approved buyers have an advantage over those who are less prepared.
You'll make your offer through a real estate agent, and you can work with any licensed agent as long as the offer is submitted through Fannie Mae's listing agent.
Keep in mind that the properties are sold "as is." Even if some repairs have been made to increase the home's marketability–for example, the house has fresh paint, brand new carpet or new appliances–it doesn't mean everything in the house is new or even usable. There are no warranties with a Fannie Mae home.
Use an experienced agent
Appraisals are not required for HomePath financing, but buyers should verify the property's worth for their own peace of mind. "Foreclosure sale" is not always code for "screaming deal."
Liz Lockhart, a real estate agent and HomePath expert with Century 21 in Cape Girardeau, Mo., says a buyer's agent should select comps to help the buyer determine what a given property is worth, "but the HomePath property is always listed at or lower than the appraised value."
Contrary to what many consumers believe, the HomePath home's listing price is not related to the amount of the mortgage which formerly existed on the property. Rather, "The current market value is the driving force," Lockhart says.
Homepath financing: the important stuff
You don't need a HomePath Mortgage to buy a HomePath home, but you may want to consider one. Many Fannie Mae lenders are also approved to do HomePath loans, so ask about these loans when you shop for a mortgage.
HomePath mortgages offer some advantages:
- Only 3 percent down is required with a minimum credit score of 660
- Down payments can come from a gift, grant, or a loan from a nonprofit organization, state or local government, or employer
- Condos are not subject to standard Fannie Mae project review standards
- Debt-to-income ratios of 45 percent to 50 percent are allowed
- No mortgage insurance is required
- You can finance second homes and investment properties
- Seller may pay up to 6 percent of closing costs
- The HomePath Renovation Mortgage can be used for a purchase, plus up to $35,000 in improvements
HomePath financing comes with some loan-to-value-based pricing adjustments, with the following points added to the loan costs. Depending upon how much money you can put down, the fees for a HomePath Mortgage can run fairly steep:
Troy M. Betsinger, a loan officer at Colonial National Mortgage in Austin, Texas, says the extra fees translate into an approximately 0.375 percent increase in your mortgage rates, but that "the payment on a HomePath Mortgage will always be lower than an FHA payment."
If you choose HomePath financing over conventional financing--for example, if a condo project doesn't meet Fannie Mae, Freddie Mac or FHA guidelines--you could try requesting that the seller pay these extra costs for you.
HomePath loans expedite closing
While there are some drawbacks, HomePath financing can make it easier to get approved and close on your mortgage. Betsinger says that most HomePath transactions close in 30 days or less.
Lockhart agrees: "The traditional lender/appraisal/underwriting process has real trouble with the concept of 'as is' value, 'as is' sales price and an 'as is' closing. I have a property under contract right now that is three weeks late in closing due to assorted underwriting issues, though the buyer's appraisal is roughly 130 percent of the sales price. If that buyer had used a HomePath Mortgage, the transaction would be closed by now, and I have no doubt about that fact."
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