Fannie Mae HomePath: A Better Way to Finance a Bank Owned Home

Foreclosure activity is at an all time high right now which is devastating to those people who are losing their homes. On the other hand, the rash of foreclosures has brought the price down to a level where more people can afford to buy homes, especially with interest rates at all time lows. With so many foreclosed homes on the market right now it should be easy to go out and buy one right? I thought so too until last year while helping my friends the Cortes' (we'll call them) find their first home.



The Cortes' were ready to buy their first home. We had discussed the financing, they knew what they could afford, how much they were willing to put down and what they wanted in a home. After the first weekend with their realtor the Cortes' looked at a lot of homes. Most of them were bank owned foreclosures and they saw a number of homes that were in really bad condition. Most of them had been stripped of the appliances, the cabinets, sometimes even the copper plumbing. The people who lost the home to the bank didn't want to leave anything of value so they didn't. Besides the fact that the Cortes' didn't really want to buy a property that needed extensive repairs, they couldn't in most cases anyway because they were utilizing an FHA loan program that has significant restrictions on property condition. While sifting through the available homes in their desired area they did manage to find a couple of homes they liked and at the Realtor's suggestion they made offers on both homes. Both were bank owned properties and in both cases they were 'outbid' by other buyers. In all actuality they were not outbid. Both of the homes they wanted to buy got lower offers from investors who were able to pay cash rather than having to take out a mortgage. Even though the cash buyers were offering less than the Cortes', they were still being chosen because the banks didn't want to risk the Cortes' not being able to secure the mortgage that they had already qualified for. Eventually after 11 offers they had one accepted and were able to close but the process was much more difficult than anticipated.

So how can you avoid going through what the Cortes' had to deal with? Fannie Mae's HomePath Program is able to help get around a number of the issues that the Cortes' had to deal with. Here are some of the highlights of the program:

• Only 3% down payment required
• No mortgage insurance
• No appraisal required / No property condition restrictions (fixers are OK)
• Some listings are eligible for the HomePath Renovation program which allows you to finance additional funds to be used for upgrades and repairs to the property.
• The program has a feature called First Look which is a 15 day time frame from the original listing date that is reserved for people who are going to occupy the home rather than investors that just want to fix the house and re-sell it. (The Cortes' really could have used this).

This sounds great right? What's the catch? There is one, the catch is that the house must be listed for sale by Fannie Mae themselves. You can find the homes that they have available at www.homepath.com. While there are some pretty funky homes that show up on here, there are also some really nice places. If you are looking for a home that you can fix up yourself, this loan program may be the best one available today. The lack of mortgage insurance is a big bonus. Right now an FHA loan has a monthly mortgage insurance payment of $115 per $100,000 that you borrow. If you can find a home that you like that qualifies, the Fannie Mae HomePath loan is a great deal!