HomePath Helps Struggling Home Buyers

In addition to low-down-payment financing and priority status for owner-occupants, the government-controlled mortgage giant, Fannie Mae, has begun offering closing-cost assistance, among other incentives, to qualified buyers, says the New York Times.

Some 31,000 properties are currently listed for sale at HomePath.com, where Fannie keeps its inventory. And last year, according to recently filed financial statements, the agency sold nearly 147,000 HomePath properties.

I’d say they know what they’re doing.

How Fannie is Giving Buyers an Edge

When new properties come online, investors are not allowed to submit offers for 20 days. During this “First Look” period, owner-occupant buyers (and nonprofit groups) get first dibs on prospective new digs.

“First Look eliminates investors coming in with ridiculously low cash offers, and gives buyers time to do their due diligence,” said Bernie Alvey, a foreclosure specialist with Exit Landmark Realty in Waldorf, Md.

Last month Fannie Mae announced additional help for cash-strapped buyers. Those who submit an offer on a First Look property before March 31 will receive 3.5 percent of the sales price to put toward closing costs — if they buy in one of the 27 states that are home to about three-quarters of the HomePath inventory, that is.

These states are eligible: Arizona, California, Florida, Iowa, Idaho, Illinois, Indiana, Kansas, Massachusetts, Maryland, Maine, Michigan, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, Ohio, Oregon, Puerto Rico, Tennessee, Virginia, Washington, Wisconsin and Wyoming.

How it Works

When buyers want to finance a purchase, they have the option of applying for a HomePath mortgage. The down-payment requirement is just 5 percent. And no mortgage insurance is required—although to some extent, “they kind of build it into the rate” on loans accorded with less than 20 percent down, said John T. Walsh, the president of Total Mortgage Services in Milford, Conn.

The greatest benefit, however, is that there is no lender-requested appraisal, Mr. Walsh said. Many foreclosed properties are in poor condition, and therefore wouldn’t qualify for traditional financing requiring an appraisal. “A lot of these properties are not habitable, but in order to get traditional financing, the property has to be habitable,” he said.

Don’t let that discourage you. HomePath also offers a companion renovation loan.

A HomePath loan also seems to give buyers an edge over their competition, Mr. Alvey said. “In the real world, a lot of these properties are getting multiple offers, and all things being equal, they’re going to pick the one that has the HomePath over the one that does not.”

Mr Alvey also warns buyers to be careful when making a decision that could last a lifetime.

Mr. Alvey also cautions buyers to make sure they know what they’re getting into on a bank-owned property, and to hire a trustworthy home inspector. “The listings don’t necessarily lay it on the line as to all that’s wrong with the property — it’s buyer beware,” he said. “It’s critical that people know these properties are sold as is.”