What is a Fannie Mae HomePath property and should you buy one?

Cash-strapped buyers or house flippers often turn to foreclosures to purchase a home at a discount. One way to do this is through Fannie Mae’s HomePath program, which makes Fannie Mae’s real estate owned (REO) property available for buyers to purchase.

If you’re interested in purchasing a HomePath home, here’s everything you should know.

What is a HomePath property?

When a home purchased with a Fannie Mae loan goes into foreclosure or settles through a deed in lieu of foreclosure, ownership of the property transfers back to Fannie Mae. Foreclosure is a legal process that allows a lender or mortgage servicer to take possession of a home and sell it to recover its losses when a borrower defaults on their mortgage. A deed in lieu of foreclosure is an agreement where a borrower voluntarily transfers ownership of their home to a lender or servicer to relieve them of their debt obligation.

When Fannie Mae acquires a home in one of these two ways, it becomes a HomePath property. These homes are for sale on Fannie Mae’s HomePath website. You’ll find many types of homes, including single-family and multifamily homes and condos – but the area you’re interested in may have limited housing inventory.

Another essential thing to know is that Fannie Mae sells these homes as is, which means the homes may require repairs beyond the maintenance and repairs Fannie Mae performs to help ensure its properties are marketable.

How does Fannie Mae HomePath work?

HomePath (Fannie Mae’s listing platform) works like other online real estate listing sites. Property listings include a listing price, pictures and property details, such as the year a home was built and how many rooms it has. Buyers can tour the homes they’re interested in and submit offers through their real estate agents.

HomePath homes have a first look period that lasts 30 days after a property is listed. During the First Look™ period, offers from buyers who plan to use the home as a primary residence and community service organizations, such as public entities or nonprofits, are prioritized. Real estate investors can’t submit offers during the First Look™ period.

Requirements for a HomePath property

To purchase a HomePath property, you’ll need to work with a Fannie Mae-approved listing agent to submit offers on your behalf and schedule home tours.

If you’re financing your purchase, you should get preapproved for a mortgage. Getting preapproved for a home loan before you start house hunting is a good idea because it gives you a more accurate sense of how much home you can afford.

According to Fannie Mae’s FAQs page, buyers can look for homes and begin to negotiate offers without a prequalification letter, but will likely need one before their offer is accepted.

If you’re purchasing the property with cash, you’ll need to submit proof of funds.

Advantages of Fannie Mae HomePath

Here are some advantages of getting a Fannie Mae HomePath property:

●      Lower costs: The main advantage of a HomePath home is that they’re priced to sell quickly. You can usually get into a home for less than you would on the traditional market.

●      Buy before investors: Buyers in search of a primary residence may appreciate the benefit of the First Look™ period. It ensures they don’t have to compete against investors and house flippers the first 30 days the property is listed.

Disadvantages of Fannie Mae HomePath

Here are some possible disadvantages of a Fannie Mae HomePath property:

●      Potential repairs: A foreclosure or REO property may need repairs, sometimes extensive, that the buyer is responsible for fixing.

●      Sold as is: While Fannie Mae performs some maintenance and repairs on their foreclosed properties, the homes are sold as is. You may need to complete costly repairs before your new home is move-in ready.

●      Can’t buy with contingencies: Fannie Mae doesn’t accept offers contingent on selling your current home. That can make things tricky for buyers who need to buy and sell at the same time.

How to buy a Fannie Mae HomePath property

If you’ve decided a HomePath home is the right choice for you, here’s what you’ll need to do:

1. Get preapproved for a mortgage

A typically solid first step in the home buying process is to get preapproved for a mortgage. A preapproval will help you set a realistic and affordable home buying budget.

During preapproval, lenders look at your income, assets and credit to determine your eligibility. It may be worthwhile to shop around and get preapproved with multiple lenders to compare their offers and help ensure you choose a favorable loan.

2. Find a real estate agent

Your real estate agent will guide you throughout the home buying process, so recruit someone you can trust. For a HomePath property, you must work with a real estate agent to submit an offer on a home.

3. Browse HomePath properties

You can search for HomePath listings by address, city, ZIP code or multiple listing service (MLS) number. If you’re buying a primary residence, keep an eye out for the First Look™ icon. Remember, these homes aren’t available to investors yet. That means less competition and not worrying about outbidding investors eager to flip the property.

Work with your agent to set up a tour when you find a home you’re interested in.

4. Submit your offer

When you’re ready, your agent will submit your offer through the HomePath site. Fannie Mae will provide updates on competing offers and let you know where your offer ranks among them. You can revise your offer as many times as you’d like before the given deadline.

FAQs about Fannie Mae HomePath

Let’s look at some frequently asked questions about Fannie Mae HomePath properties.

Can you negotiate on the price of a HomePath property?

Home buyers can negotiate on the price of a Fannie Mae HomePath property. Like a traditional sale, a lowball offer may get rejected, especially if another buyer is ready to pay more. Work with your real estate agent to make a well-priced offer Fannie Mae will accept.

What is a HomeStyle Renovation mortgage?

The HomeStyle Renovation mortgage helps buyers finance a property and cover the cost of renovations up to $35,000, much like the Federal Housing Administration’s FHA 203(k) loan.

Properties listed on Fannie Mae’s website will indicate whether it’s a HomePath or HomeStyle Renovation property.

Does Fannie Mae maintain foreclosed HomePath properties?

Yes, Fannie Mae performs essential services inside and outside a home to maintain and preserve the property, including graffiti removal, gutter cleaning and repair, fence repair, window and door replacement, roof damage restoration and more.

The bottom line: HomePath can help you buy an affordable home

For home buyers who want a competitively priced home, a HomePath property can be a great option. However, buyers who want a move-in ready home should do their due diligence and look beyond a low price tag.

If you want to purchase a HomePath home, consider hiring a home inspector to thoroughly assess its condition and gauge the types of repairs it may need.

When you’re ready to take the next step toward buying a HomePath property, start the application process online to turn your dream of homeownership into reality.