Get Adobe Flash player
Archives

HomePath

FNMA’s (Fannie Mae) HomePath program can be a lucrative deal for any home buyer; private or investor.  A successful investor uses a few basic strategies when buying residential real estate:

  1.  Buy the property at the right price and terms.
  2.  Buy the property when the market is appreciating.
  3.  Buy a property that needs some work; thus, with a little sweat you build equity.

Using all three strategies can maximize returns for the most successful investors. But, I wonder, how might the average buyer capture similar success? Here’s one potential, relatively new opportunity in the marketplace, administered by FNMA, called the Fannie Mae “HomePath” program.

Fannie Mae handles thousands of foreclosed properties annually. Their HomePath program is designed to move these properties more quickly by giving lenders and buyers less stringent finance requirements. The lender is offered two incentives by the HomePath program, such as the ability to resell the loan to FNMA and a higher loan volume due to more loans being closable, but the buyer is offered four very important incentives for a variety of property types:

  1. 1.  No appraisal is required because values are established by the offered prices, thus no appraisal fees
  2. 2.  Minimal down payments are required – as little as 3 percent – which can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
  3. 3.  No mortgage insurance is required, in the vast majority of cases, which means less up-front cash from buyers and lower monthly payments.
  4. 4.  Credit-score requirements are more flexible, especially good for buyers with less-than-perfect credit.

It’s important to note that the last three incentives balance buyer quality with adjustments to either the down payment required or the interest rate. In other words, if a buyer has a low credit score, they may have to put more money down, take a higher interest rate or pay mortgage insurance.  These are basic risk adjustments to the pricing of the loan.

In the first investment strategy noted earlier, buying a property at the right price and terms is easier in situations of oversupply. For example, if you are looking for a retirement home or investment property, a recent check of eligible HomePath properties (done 6/17/2010) showed that California had 9,070 houses, Florida 7,512 houses, Arizona 5,436 and Kentucky had 515. This means that, on a per capital basis, Arizona has the highest supply relative to the others with Florida in second place; while this comes as no surprise, these two states happen to be great places for second homes!

Accomplishing the second strategy — judging when a real estate market will start to appreciate again — varies with location. The goal is to catch the market just after it begins to make an upward turn, rather than at the absolute bottom. For example, while 5,436 eligible Fannie Mae homes in Arizona sounds excessive, it breaks down to 1,235 in Phoenix, 423 in Tucson and 183 in Scottsdale. Market conditions can be assessed only at the local level, so buyers need to take time to research and seek local professional help. If you need help finding a buyer’s agent, please contact me as I have plenty of contacts that I would be happy to share.

In some cases, the HomePath program also helps with Strategy 3, because some properties might need repairs and will qualify for the HomePath Renovation Mortgage. This program lets you buy a house and finance minor repairs, typically determined by a home inspection.

On that note, it’s highly recommended that all homes should be inspected prior to purchase, and this is especially true with foreclosures, because Fannie Mae will not know a property’s history. Because HomePath properties, as with most foreclosures, are offered on an “as is” basis and appraisals are not required, a home inspection is one way a buyer can have a better idea of potential problems with the property. The standard Fannie Mae addendum to the purchase contract – one that can be completed with the help of your buyer’s agent – gives a buyer 10 days to inspect, so be watchful of the contract dates. If the inspection reveals unacceptable defects, a buyer has only two alternatives: 1) renegotiate with Fannie Mae, or 2) find another home.

For more information about eligible HomePath properties go to HomePath.com. For a free HomePath pre-approval – something that is mandatory before you can make an offer on a HomePath home – please contact me. Whether you are looking for a new home, a second house or an investment property, explore all your options, do your homework and follow the basics.

Print Friendly, PDF & Email