Every now and then when perusing the homes for sale in the area I’d like to live in, I see a description that states it is a Fannie Mae HomePath property.
What exactly does this mean? Does it make the buying process any different?
When a property is a HomePath property it means that it is (a) a bank-owned home owned by Fannie Mae, and, (b) the buyer of the property is eligible for the Fannie Mae HomePath mortgage program.
As you may know, Fannie Mae is the largest lender in the United States. Fannie Mae currently has thousands and thousands of homes on their books due to the large number of recent foreclosures. In an effort to help banks liquidate their Fannie Mae REO inventory, Fannie Mae came up with the HomePath program.
The HomePath program gives lenders and buyers less stringent finance requirements, which is great because more buyers can actually qualify for a loan. Another great thing – you can get a HomePath mortgage for owner-occupied OR investment properties. Fannie Mae also has a HomePath renovation financing program for those distressed properties that need a little help before they’re ready to be lived in.
Going the HomePath route makes the home buying process different for a few reasons:
- No appraisal is required.
- You can make a down payment of as little as 3% of the purchase price.
- No mortgage insurance is required (therefore, less up-front cash from buyers and lower monthly payments).
- Credit score requirements are more flexible.
So, the million dollar question – why would a lender agree to such a loan?
Well, Fannie Mae is offering a couple of incentives to lenders who process these loans. First, loans can be sold back to Fannie Mae, so lenders aren’t holding the loans in their own portfolios. Second, the more loans a lender makes, the more fees it generates for originating and servicing the loans.
I know what your next question will be – with all the cash investors snatching up distressed properties in the area, is it even possible to get one of these properties with a HomePath loan?
I’m not going to tell you that it will be easy, a lot of the time if a bank can get cash, they’ll take it. But! We are actually in escrow on a HomePath property and, except for a delay in opening escrow because it has to go through the Fannie Mae channels, everything is going smoothly so far (knock on wood).
My big advice for going into escrow on HomePath properties is to fully exercise your due diligence – get that property inspected thoroughly! These banks don’t know a lot of the details on the condition of the property, and they rarely will do repairs before the close of escrow. So do your homework and really understand what you’re getting into.
For more information and a database of HomePath eligible homes, visit www.homepath.com