Before I delve into answering the question, the title of this post asked. I would like to first say that this post is not written to only brief you of what Fannie Mae HomePath is. It goes beyond revealing all you need to know about Fannie Mae HomePath. Only keep reading.
What is Fannie Mae HomePath?
I will start by saying that Fannie Mae works with mortgage servicers, Banks that own your loan & housing counselors, and other partners to help homeowners prevent and avoid foreclosure. How? They do that through their website at www.KnowYourOptions.com. In other words, Fannie Mae offers assistance directly to homeowners so they can understand their options to avoid foreclosure.
However, sometimes foreclosure is unavoidable. As such, when foreclosures occur on mortgages in which Fannie Mae is the owner/investor in a package of loans that the banks sold off loans. Fannie Mae’s goal is to sell properties on time to minimize the impact on the community or individual.
That said, let’s go into detail about how Fannie Mae serves many of its customers.
How Does Fannie Mae HomePath Work?
HomePath is an online program through which you can purchase Fannie Mae-owned properties that are going to be foreclosed. Fannie Mae will acquire these properties by a deed-in-lieu. This means that the homeowner voluntarily gives up ownership of their home to the mortgage company.
To go a bit further, Fannie Mae may acquire ownership of properties through a deed-in-lieu of foreclosure.
More so, a transaction in which the homeowner (mortgage borrower) voluntarily transfers the ownership of the property (the title and all property associated with it) to the owner of the mortgage (bank or loan company) in exchange for a release of their mortgage loan and payments. Who then, in turn, sells loans in packages to Fannie Mae, Freddie.
But once a home is listed on the HomePath website, you work with a real estate agent to tour the home and make an offer. The HomePath program only accepts offers from Fannie Mae approved listing agents. But you can work with a local agent to help you submit an offer to the listing agent.
HomePath – What you Need to Know
It’s important to know that Homes acquired by Fannie Mae known as a foreclosure or similar means are referred to as real estate owned (REO). More so, Fannie Mae requires a minimum FICO credit score of 620 to qualify for its mortgage loans. But the qualifying requirements may vary according to the down payment amount and individual home buyer circumstances.
HomePath Home Prices & Payment
To begin with homes on the HomePath website or through agents are priced competitively. The reason has been that Fannie Mae’s goal is to sell off these properties quickly. In other words, it simply means that first-time homebuyers. Or those looking to purchase a bigger home for less will most likely benefit.
On the other hand, Fannie Mae also offers incentives like flexible mortgage terms and low down payments for some properties. More so, it offers special financing options, such as the HomeReady® mortgage and HomePath Ready™ Buyer programs. Real estate investors may be able to benefit. But they may not qualify for the same financial incentives that homeowners would.
Fannie Mae First Look™ program
This program is for those who intend to purchase a primary residence. Houses listed under First Look™ are new listings that only accept bids from homeowners within the first 15 days of listing. Buyers who don’t plan on moving in cannot bid in the first 15 days a First Look Home is listed.
In my advice, I would say you should deal with intermediaries (real estate agents and lawyers) that are familiar with the processes and restrictions. The “little guys” are offered an advantage through First Look Special Offers:
Fannie Mae’s innovative First Look marketing period was created to promote homeownership and contribute to neighborhood stabilization. Thereby allowing homebuyers to negotiate and purchase foreclosed properties before they are made available to investors.
What you Should Know about the First Look Program Offered By Fannie Mae
- First Look is typically the first 20 days a property is listed on Fannie Mae REO Homes for Sale (Nevada is 30 days).
- Properties in the First Look period have a countdown clock on the property information page of Fannie Mae REO Homes for Sale displaying the days remaining to purchase.
- Eligible buyers during First Look are owner-occupants, public entities and their partners, and some nonprofits.
- Owner-occupants are those buyers that will occupy the property as their principal residence within 60 days of closing and will maintain their occupancy for at least 1 year.
- Again, owner-occupant purchasers are required to sign an Owner Occupant Certification as a rider to the Real Estate Purchase Addendum.
- A buyer purchasing in the name of a trust, purchasing as a vacation/part-time residence, or purchasing so another person or relative can live in the property will typically be considered an investor and not eligible during First Look.
- Investor offers submitted after the First Look period expires will be considered along with all other offers.
Benefits of Buying a Fannie Mae Home
First,HomePath properties give owner-occupiers 20 days to act before investors. Investors often gobble up foreclosures before the little guys even know they’re available.
Second, Fannie Mae will pay up to 3% of closing costs, an average of $5,000, for first-time homebuyers who complete its six-hour. And online homeownership training class. The class explains the fundamentals of buying, owning, and maintaining a home.
Finally, all properties are listed, and they accept all offers online at Fannie Mae REO Homes for Sale, which makes the process “transparent”. “Fannie Mae can see all offers, and we select those that are the highest and best.”
What is a Fannie Mae HomePath Property?
To begin with, Fannie Mae properties are properties that have gone through a foreclosure transaction. It simply means their previous owner was in default and the lender took ownership of the property. Also, with the special circumstance that Fannie Mae actually owns these rather than a lending institution or a bank.
On the other hand, usually, you need to clean up these properties and fixed up as the previous owner most likely went through a lot of life’s ups and downs. And financial hardships and ultimately lost their property.
Again, the prices may be a bargain depending on market conditions and the particular unit’s condition. But it is not always the case. Special incentives and special financing may be available to buyers who plan on occupying the property as their primary residence & also to investors.
Be it as it may, I would advise you to contact a licensed and experienced realtor to represent you in preparing your purchase contract.
What you need to know about Fannie Mae HomePath Property
First, a HomePath property is any home that’s owned by Fannie Mae as a result of a foreclosure.
Second, intending homeowners or buyers have a variety of choices, ranging anywhere from condominiums to single-family homes.
Third, bear it in mind that sales prices and the number of homes can vary depending on your area.
Fourth, if you are in search of a home available for sale. So, the only way to tell what types of properties are available is to look on the HomePath website and search for the area code of your choice.
It’s important to know that the condition of HomePath properties varies as well. Meaning that some homes are move-in ready, while others may require repairs before they’re habitable.
Sixth, although Fannie Mae mentions that the company may make repairs to help market the home. But that doesn’t guarantee that there won’t leave over repairs for you to take care of. It all depends on your choice. And the type of home you went for.
Seventh, it makes sense and fact to say that in some cases Fannie Mae sells each home as there are. This simply means that you will be responsible for handling any repairs or problems after closing.
Eight, let me make it clear that Fannie Mae doesn’t guarantee any repairs or renovations that have been done on a home. In other words, if the company is aware of any hazards or major issues on a property. Of course, they will inform listing agents.
Finally, I did advise you to hire a qualified professional, such as a home inspector, to check out the property before purchase.
Note that you may buy a home warranty that’s if it’s available. But that’s no excuse not to do your research before deciding if the home suits what you are looking for.
How to apply for the HomePath Program – Buying a Homepath property
I like to begin by saying that there are two kinds of HomePath mortgages. The first one is your straight-up mortgage, an everyday mortgage that requires only 5% down for move-in-ready homes.
The second one, HomePath Renovation, provides a mortgage plus additional funds for fixer-uppers. Sometimes investors like this second option even more than minor home improvements can create additional equity.
The truth is:
When purchasing a HomePath property, you must submit an offer to a Fannie Mae approved listing agent. You have to submit your offer in writing and, if applicable, by a specified time and date.
But bear in mind that they don’t accept contingent offers. This means you won’t be able to request that the seller take the house off the market and wait for you to sell your previous property before closing.
Importantly, you also don’t need to obtain a lender’s prequalification statement before submitting an offer. However, a prequalification statement may help you get financing and close on a home more quickly.
On the other hand, you can purchase a HomePath property using a conventional mortgage loan. The usual requirements include a minimum credit score of 620, although a higher score will give you better rates.
More so, you’ll also want to have a maximum loan-to-value ratio of 80%. And your debt-to-income ratio must be equal to or less than 36% of your monthly gross income. Most mortgage companies also ask that you have a 20% down payment. If your down payment is less than 20%, you maybe need to purchase private mortgage insurance.
Fannie Mae HomePath Financing Options
If you can’t purchase a home through a conventional mortgage. Here comes when you need to consider Fannie Mae HomePath Financing Options. As it is the best in the market out there.
HomeReady® Mortgage Program
This is specifically for HomeReady buyers who want to buy a single-family home and can meet the income limits in their area.
They give this set of buyers a 3% down payment and co-borrower flexibility are among other features. However, to qualify for this option, you’ll need to complete an online homeownership course run by Framework. You can also access this option whether you buy a home property or don’t.
HomePath Ready Buyer™ Program
They design this program for homebuyers who complete the HomePath Ready Buyer online education course. Besides, if in the end, they purchase a HomePath property. They can receive up to 3% back in closing costs.
But it makes sense to inform you that you are still liable to combine both the HomeReady mortgage and Ready Buyer™ program on the same purchase. Double financing options.
To cap it up, of a truth, Fannie Mae’s financing options make it easier to purchase a home than with a conventional mortgage. In that, the HomePath program provides options for financing assistance.
Furthermore, it provides competitive pricing. But most importantly, it also makes for a speedy closing. The good news is that the ball is in your court. Meaning that you can choose the financing option that suits your needs. That includes FHA, VA, and USDA loans. Be it as it may, you must meet all the equipment, including the credit score required to qualify for Fannie Mae HomePath Financing Options.
What does Freddie Mac and Fannie Mae do and how do they make their money?
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) and help to create liquidity in the mortgage market. That small sentence has significant ramifications.
You go into your bank and get a mortgage. The bank has to get the cash for that mortgage from someplace. Initially, that money comes from short- and long-term deposits from their depositors (bank accounts, CDs, etc.). But the bank has limited funds available to lend out.
So rather than keeping the mortgage (and the monthly string of payments that you will make to them), they “sell” the mortgage to a company like Fannie Mae or Freddie Mac. Now, instead of you owing the balance of your mortgage to your bank, you owe it to one of them.
The GSEs have lots of money, but not enough to actually outright own all the mortgages that they buy. So, how do they get their cash? Just like your local bank, they find someone to buy their mortgages.
But, rather than selling each mortgage individually, they bundle them together and sell them as Mortgages Backed Securities or MBS.
In other words, these are generally bought by institutional buyers such as pension funds (e.g. CALPERS), perhaps mutual fund managers (e.g. Pimco), and other organizations that have large amounts of capital, but may want or need to invest in very secure securities. MBSes from the GSEs are called “Agency MBS.”
They also take some of these bundled mortgages and slice them up into smaller pieces that can be bought more easily by individuals.
Although, not like you and me, but by accredited investors who tend to have lots of money and lots of investment knowledge. There are other, more complex, financial instruments created as well.
These securities generally have relatively low rates of return compared to other investments. And the groups that buy MBSes aren’t interested in owning your home if you default.
So making the securities more attractive, the GSEs guarantee the return on the securities. In this way, it guarantees the investor (to the extent a company can guarantee such large amounts of money) to get their investment back.
How can the GSEs make money on this?
Well, they make it in a few ways. First, they get a portion of the interest that you pay from your mortgage. They also get what I call a g-fee or a guarantee fee.
Think of this as the insurance premium. This is paid by the borrower and built into your interest rate when you take out the loan (I’ll come back to this in a minute) and is used to help offset any costs if you default on your loan when the GSEs have to honor their guarantee on the MBSes that they sold.
Finally, they also maintain a “small” portfolio of mortgages on their own books and retain the interest payments on those. But these tend to be loans with problems, such as a payer that has started to fall behind on their payments, or who recently got their loan modified to make it more affordable.
In the End
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