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The Fannie Mae HomePath program exists to help the organization quickly shed foreclosed-upon homes.
In turn, this minimizes the impact on defaulting homeowners, lets prospective buyers move in at a lower price point, and keeps the housing market liquid.
What is Fannie Mae HomePath?
The Fannie Mae HomePath program funnels houses through the company’s foreclosure process to put them in buyers’ hands (and out of Fannie Mae’s) as quickly as possible.
Some properties may require a little (or a lot) of work, while others are ready to move into immediately. But regardless of the state of the house itself, each is sold in as-is condition.
Once Fannie Mae repossesses a property, it lists them on the HomePath website for buyers to browse through.
Each is priced competitively to expedite offloading, which makes them more affordable than most homes.
They also come with other benefits, such as low down payments, closing cost assistance, flexible mortgage terms, and other special financing perks.
How Does Fannie Mae HomePath Work?
To get a Fannie Mae HomePath property, you have to jump through a few hoops outside the traditional house hunting process. We’ll cover them in detail here.
#1. Budget Accordingly
Before you set out to find a home, you should know roughly what you can afford. While it doesn’t hurt to look at properties slightly above your budget – in case you can score a better deal – you’ll need to meet certain income and credit score requirements to get bigger mortgages.
Consider factors such as your current income, your DTI (debt-to-income ratio), housing needs, and long-term plans when you build your budget.
Additionally, bear in mind that Fannie Mae sells HomePath properties in as-is condition, so you might need to front a few thousand dollars for repairs and renovations in addition to fees, taxes, and insurance.
#2. Get Preapproved
After you’ve decided on your budget, it’s time to get preapproved by a few different lenders. A lender’s preapproval letter will provide an estimate of how much they’re willing to lend you plus the interest rate, fees, and loan terms you qualify for.
While it’s not legally binding, getting preapproved lets realtors, sellers, and most importantly, Fannie Mae know that you’re serious about buying a home. In turn, that makes you more likely to be considered when you view properties and submit offers.
#3. Find a Real Estate Agent
Fannie Mae will only accept offers on HomePath properties from Fannie Mae-approved listing agents.
However, your local agent can submit an offer through the correct channels for you. To that end, you’ll want to find an experienced real estate agent to work on your behalf – preferably one who knows your area and has experience and connections in the field.
#4. Review HomePath Properties
Once Fannie Mae takes possession of a property, either by deed-in-lieu or involuntary eviction, the company lists it on their website. (We’ll cover these foreclosures in more detail below.)
Then, prospective buyers can surf homepath.fanniemae.com to view eligible properties by address or zip code. Each property comes with a detailed description and recent photos to give you an idea of what you’re getting into.
There’s also a filter feature to narrow your search by price, number of bedrooms and bathrooms, and square footage.
Note that many homes are priced competitively – read: at a significant discount – to move them quickly. If you find a home you like, you need to act, as it may be gone before you know it!
Another important detail is that, for a short period of time, each home is only available via the First LookTM program. During this period, Fannie Mae only accepts bids from homeowners who intend to use the property as their primary residence.
However, houses only remain in the First LookTM program for 15-30 days, depending on the state, after which the bids open to real estate investors as well.
#5. Enroll and Complete the Buyer Education Course
Once you’ve found a promising property, it’s time to complete the HomePath Ready BuyerTM program.
This nine-module course is required before submitting an offer if you plan to request closing cost assistance from Fannie Mae. (Even if you don’t, you’ll need to complete the course before you close on your mortgage.)
The program, which takes around 4-6 hours to complete, costs $75 up front. (Fannie Mae will reimburse the cost when you close.)
It covers multiple topics surrounding homeownership including setting a budget, finding a property, and choosing a mortgage.
#6. Submit an Offer
Now, all that’s left is for your real estate agent to submit your offer through the HomePath Online Offer portal. You should also note if you need closing cost assistance at this time.
If Fannie Mae accepts your offer, your agent will walk you through the rest of the closing process.
In addition to taking on your mortgage, you’ll have to sign an owner-occupant certification promising to move into the home within 60 days of closing. You’ll also need to agree to use the property as your primary residence for at least one year.
>> More: How to Apply for a Mortgage
What is a Fannie Mae HomePath Property?
A HomePath property can come in many shapes, sizes, prices, descriptions, and locations. You can find all manner of properties listed, such as:
- Single-family homes
- Multi-family properties (up to four units)
- Manufactured houses
- Condominiums (condos)
Regardless of what they look like or where they are, they all share one commonality: they’re houses Fannie Mae foreclosed upon. But not all foreclosures are made equal.
During deed-in-lieu foreclosures, the homeowner voluntarily revokes their ownership and hands the title to the mortgage company. This stops a foreclosure from hitting their credit report and saves Fannie Mae on legal fees. Typically, these homes are in better shape.
In involuntary foreclosures or seizures, Fannie Mae may have to evict the previous tenants of the home. Some of these houses come worse for the wear, as the prior owner may not have the money or inclination to maintain the property.
Regardless of how Fannie Mae acquires them, all HomePath properties come “as-is,” meaning that it’s up to the buyer to do due diligence on their current condition and needed repairs. And, as we noted above, the condition may vary.
While some are move-in ready at the time of sale, others may require extensive work before they’re habitable.
And though Fannie Mae might spend some time and money upgrading the home to a certain standard, it’s no guarantee with any HomePath property.
Can Anyone Buy a Fannie Mae Property?
As long as you meet the requirements, yes – anyone can buy a Fannie Mae property.
What Credit Score Do You Need for Fannie Mae HomePath?
You can buy a Fannie May HomePath property with several types of mortgages, each with their own credit score requirements. As a general rule, you need a credit score of:
- 580 for government-backed loans, such as FHA and VA loans
- 620 for conventional loans
- 690-700 or higher for jumbo loans
Other Requirements for Fannie Mae HomePath
If you want closing assistance, you’ll need to meet a few HomePath-specific requirements. For instance, you’ll need to be a first-time homebuyer, which Fannie Mae defines as anyone who hasn’t held homeownership in the last three years.
Moreover, you must:
- Submit an offer in writing via an approved Fannie Mae listing agent
- Put in your offer by a specified time and date (if applicable)
- Meet the requirements of your chosen loan
- Move in within 60 days of closing
- Use the property as your primary residence for at least one year
And credit scores aside, you also have to qualify for your chosen loan, including meeting income, debt, and down payment specifications.
Benefits of Buying a HomePath Property
Buyers who choose HomePath properties can take advantage of the many unusual perks of Fannie Mae’s foreclosure program, such as:
Fannie Mae is a mortgage guarantor, not a seller, which means the enterprise wants to move properties quickly.
One way they incentivize sales is by reducing their prices below market value, making them cheaper than non-foreclosed homes.
Clear Titles (Usually)
When you buy a home on foreclosure, the bank or investor already owns the title, which means you rarely have to worry about title claims.
However, keep an eye out for HomePath properties that have refinanced mortgage loans or solar panels installed, as these may involve second loans that cause problems later on.
Your real estate agent should help you mitigate these issues before closing.
>> More: What Is a Clear Title?
Unusually, the Fannie Mae HomePath program also offers financial assistance to homebuyers. Potential perks include smaller down payments, closing cost aid, and special financing terms.
Better Condition on Deed-in-Lieu Transfers
Homeowners who voluntarily walk away from their deeds typically leave their house in better condition than those under involuntary foreclosure. (Of course, that’s not always the case.)
Disadvantages of Buying a Fannie Mae HomePath Property
But like all good things in life, even HomePath properties have their issues. Several, in fact.
Though first-time homebuyers get dibs on HomePath properties, they’ll go on sale on the broader market after a few weeks.
Once there, real estate investors often snatch them up at a steep discount – so you have to move fast.
May Not Be in the Best Location
While some HomePath properties are literal mansions, others are…not so big. Nor are they all in prime real estate locations.
While that suits some buyers just fine, if you’re picky about where, exactly, you want to live, purchasing a home from the HomePath website may not be for you.
No Contingent Offers
Fannie Mae doesn’t accept contingent offers for HomePath properties, which means they won’t pull houses off the market while you try to sell your own.
If you own your home outright, that’s likely less of a problem than for someone who would have to take out two mortgage payments.
Foreclosures often have more damage than standard market homes, which means you may have to shell out big-time for repairs to fix rot, mold, or physical damage.
You also don’t have an opportunity to submit a request for renovations or repairs on HomePath properties, as each is sold in as-is conditions.
Fannie Mae doesn’t guarantee that any repairs or renovations will be completed on any HomePath homes.
Additionally, while listing agents will notify the company of major concerns, it’s possible that not all hazards or major issues will be properly reported. As such, the onus is on you to hire a trustworthy home inspector to assess the risks before you close.
Fannie Mae HomePath Financing Options
Because Fannie Mae often works with low- to moderate-income buyers, they offer two unique financing options to help first-time buyers get off the ground. (Note that you can combine these programs on your mortgage!)
HomeReady® Mortgage Program
Buyers who want to buy a single-family home can take advantage of the HomeReady® Mortgage Program.
This program is available to all buyers who meet their area’s income limits, not just HomePath participants.
This program offers co-borrower flexibility, a 3% down payment to qualifying borrowers who complete the online homeownership, and lets you list potential rental income from your new property in your income estimates.
HomePath Ready BuyerTM Program
With the Ready BuyerTM program, you can receive up to 3% back in closing costs on HomePath properties if you complete the HomePath Ready Buyer online education course.
>> More: Review the Best Mortgage Lenders
Bottom Line: What is Fannie Mae HomePath?
The Fannie Mae HomePath program helps prospective homeowners buy their dream home cheap on the foreclosed home market.
While some properties come in decent shape, others require a substantial amount of work to make them live-in ready.
But thanks to their foreclosure status and potential flaws, these houses also come with several perks, such as financial assistance, short closing periods, and special financial terms.
Plus, many of them are eligible for government-backed home loans, which makes them ideal for younger or lower-income borrowers who want to move in quickly.
If you’re looking for a fixer-upper with less haggling and negotiation than a typical home, a Fannie Mae HomePath property may be in your future.
But if you want a property in prime condition or the perfect location, you might want to look elsewhere.