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.

When a homeowner with a Fannie Mae-owned loan on their home goes into foreclosure or arranges a deed in lieu of foreclosure, Fannie Mae takes over ownership of the home.

Foreclosure is the process by which the lender or servicer takes possession of the home the loan was used to purchase in an attempt to recoup their losses. Typically, the borrower has 120 days from the first missed payment before the foreclosure process will begin.

A deed in lieu of foreclosure is an agreement in which the borrower voluntarily transfers ownership of their home to the lender or servicer, who in turn relieves the borrower of their debt obligation.

When Fannie Mae acquires a home in one of these two ways, it becomes a HomePath property. These homes are listed for sale on Fannie Mae’s HomePath® site.

You can find many different types of homes, including single-family homes, multifamily homes and condos, all across the country on HomePath^®, but inventory may be limited depending on where exactly you’re looking.

It’s also important to know that Fannie Mae sells these homes as is, which means that the homes may be in need of repairs. However, Fannie Mae does do some maintenance and repairs on its properties to help ensure they’re marketable.

Fannie Mae’s listing platform, HomePath®, works similarly to other online listing sites. Listings include a listing price, pictures and details about the property, such as when it 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 come with a “First Look” period, which lasts for 30 days after the property is listed. During the First Look™period, priority is given to buyers who plan to inhabit the home as a primary residence or what Fannie Mae refers to as “community-minded organizations,” such as public entities or nonprofits. Real estate investors can’t submit offers during the First Look™ period.

What Is The HomePath Ready Buyer™ Program?

For buyers of HomePath^® homes, Fannie Mae has another mortgage program that can help first-time home buyers get into a home more affordably.

The HomePath Ready Buyer™ program offers up to 3% in closing cost assistance to buyers purchasing a HomePath^® property. To qualify, you’ll need to be a first-time home buyer and complete Fannie Mae’s homeowner education course. This program can also be combined with a Fannie Mae-backed HomeReady mortgage, which allows borrowers to get a conventional loan with a down payment as low as 3%.

HomePath Ready Buyer™ loans are ideal for borrowers with lower income, limited money for a down payment, a low credit score and a maximum debt-to-income ratio (DTI) of 50%.

To purchase a HomePath® property, you’ll need to work with a Fannie Mae-approved listing agent, who will help you schedule tours and submit an offer on your behalf.

If you plan on financing your purchase, you’ll also want to get preapproved for a mortgage. According to their site, Fannie Mae doesn’t require a prequalification letter before negotiating an offer, but they will need one prior to final acceptance of your offer.

Getting preapproved for a loan before beginning your house hunting journey is a good idea in general because it gives you a more accurate sense of how much home you can afford.

If you’re using cash to purchase the property, you’ll need to provide proof of funds.

The main advantage of purchasing a HomePath® home is that they’re priced to sell quickly, so you can often get into a home for less than you would on the regular market.

Another plus is the ability to utilize Fannie Mae’s HomePath Ready Buyer™ program, which offers up to 3% in closing cost assistance. Keep in mind, though, that this is only for first-time home buyers who complete Fannie Mae’s homeownership education course.

Buyers in search of a primary residence may also appreciate the First Look™ period, which ensures that they don’t have to compete against seasoned investors and house flippers for the first 30 days the property is listed.

Buying a foreclosure or REO property isn’t without risks; sometimes, these homes will need repairs, the cost of which falls to the buyer.

While Fannie Mae does some maintenance and repairs on their foreclosed properties, the homes are sold as is, so you may still have to complete costly repairs before your new home is completely move-in ready.

Fannie Mae also doesn’t accept offers that are contingent on the sale of your current home, which can make things tricky for those who need to buy and sell at the same time.

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

1. Get Preapproved For A Mortgage

Like we said, it’s always a good idea to make getting preapproved for a mortgage your first step in the home buying process. Looking at a house with a preapproval will be the best way to get an accurate picture of what your budget should be.

During the preapproval process, lenders will look at your income, your assets and your credit to determine what you qualify for. You may want to shop around and get preapproved with multiple lenders to compare offerings and make sure you’re getting the loan that’s best for you.

2. Find A Real Estate Agent

Your real estate agent will be your guide throughout the home buying process, so it’s important to work with someone you trust.

3. Browse HomePath® Properties

You can search for HomePath® listings online using Fannie Mae’s property search tool by address, city, ZIP code or MLS number. If you’re buying a primary residence, keep an eye out for the First Look™ icon – these are homes that aren’t yet available to investors, meaning you won’t have to outbid pros looking to flip the property.

When you find a home that you’re interested in, work with your agent to set up a tour.

4. Prepare Your Request For Closing Cost Assistance

If you’re eligible and plan to use Fannie Mae’s HomePath® Ready Buyer program to receive closing cost assistance, you’ll need to complete Fannie Mae’s homeownership education course prior to submitting an offer. A completion certificate will need to be provided along with your offer, and your agent will need to include a request for closing cost assistance in the purchase contract.

5. Submit Your Offer

Once you’re ready, your agent will submit your offer through the HomePath® site. Fannie Mae will provide updates on whether the property has received competing offers and, if so, how your offer ranks among them. You can revise your offer as many timesas you’d like before the given deadline.

For those looking to purchase a competitively priced home, a HomePath® property can be a great option. However, buyers looking for a move-in ready home should be sure to do their due diligence and look beyond a low price tag.

If you’re thinking of purchasing a HomePath® home, consider working with a home inspector to get a comprehensive understanding of the home’s condition and what types of repairs it might need now or in the future.

When you’re ready to take the next step toward buying a HomePath® property, get started on the application process online and see what financing options are right for you.