For many people, the dream of buying a home seems unattainable. Between high rents, student loan debt and overheated real estate markets around the country, even those with high salaries can find themselves unable to save what they need for a down payment and closing costs. With these pressures in mind, Fannie Mae has developed a comprehensive program, including a portfolio of low down payment options, to meet the needs of today’s prospective home buyers. One aspect of that is the HomePath Ready Buyer Program.
The Quicken Loans® Conventional Product Manager Justin Herring says this new program is a real win for first-time home buyers. “While Fannie Mae hasn’t announced an end date for this program, I would encourage clients to take advantage of this great offer now,” Herring says. “Rates are near historic lows.”
What Is The HomePath Ready Buyer Program?
Fannie Mae’s new HomePath Ready Buyer program offers first-time home buyers the opportunity to get up to 3% of the purchase price back in the form of closing cost assistance on Fannie Mae-owned HomePath properties.
What Is Fannie Mae?
The Federal National Mortgage Association, commonly known as Fannie Mae, is a government-sponsored enterprise with a twofold mission. Fannie Mae was created in 1938, during the Great Depression, to keep mortgage lenders liquid. Fannie does this by buying the mortgages originated by lenders and repackaging them for sale to investors on the secondary mortgage market. Second, Fannie Mae helps low- and moderate- income prospective home buyers afford home ownership by offering incentives and assistance during the mortgage application process.
What Are HomePath Properties?
When borrowers default on their Fannie Mae-backed qualifying mortgages, ownership often reverts to Fannie Mae through a deed in lieu of foreclosure transfer. Borrowers who will never catch up on their mortgage payments sign their homes over to Fannie Mae to avoid having a foreclosure on their credit history. That means Fannie Mae can get these back onto the market quickly. This is significant because foreclosures can take a long time, and the house can sit vacant or worse, suffer damage at the hands of owners who know they will ultimately face eviction.
How Does The HomePath Ready Buyer Program Work?
Fannie Mae offers these homes for sale to the general public through HomePath.com. Suppose you find your next home on the site. What are your next steps?
Contact A Real Estate Agent
You must work with a real estate agent to buy a home from HomePath.com. This is required by Fannie Mae to help make sure home buyers understand exactly what they’re buying when they purchase a deed in lieu home through HomePath.
Complete The HomePath Ready Buyer Online Class
The HomePath Ready Buyer class is offered online. It should take about 4 – 6 hours to complete. You will have to pay $75 to complete the course, but that fee will be reimbursed if you close on a HomePath home. Once you complete the HomePath Ready buyer program, you will print out your Certificate of Completion and give it to your real estate agent. They will submit the certificate along with your offer on a HomePath home.
Reap A Valuable Reward At Closing
On closing day, you’ll get a credit of up to 3% of the purchase price toward your closing costs. Suppose you are buying a home for $200,000. Your credit would be $6,000, plus the $75 fee you paid when you signed up for the online class. In addition, your closing costs are generally lower because you won’t be required to have an appraisal completed for the lender’s consideration.
Unfortunately, if your closing cost credit exceeds your actual closing costs, you don’t get any additional credit. But still, that’s a large wad of cash you can leave home on Closing Day.
What Topics Are Covered In the HomePath Ready Buyer Course?
The goal of this course is to prepare first time home buyers for the responsibilities of home ownership. The nine-module course covers topics like these:
- Whether you are ready for home ownership
- Determining how much you can afford to spend on your new home
- Understanding credit
- Understanding the mortgage application process
- How to decide which home is right for you.
Who Is Eligible For Closing Cost Assistance?
The assistance Fannie Mae provides can go toward closing costs, points, prepayment of expenses and reimbursement of your buyer’s education course fee. There are a few eligibility requirements:
- You must be a first-time home buyer. If you have a co-buyer, only one of you must complete the course.
- The home must be your primary residence within 60 days of closing.
- Tenants in tenant-occupied properties are eligible to buy homes through the program.
- The home must be a Fannie Mae-owned HomePath property.
How Can I Finance My HomePath Home Purchase?
Fannie Mae backs low down payment mortgages, available through lenders like Quicken Loans. Even if you don't take advantage of the closing cost assistance offered by the HomePath Ready Buyer program, these loan options may be used to purchase homes regularly available on the market and those owned by Fannie Mae.
For Lower Income Home Buyers
For low-income home buyers, there is the HomeReady Mortgage. If you earn up to 80% of your area’s median income, you can get a mortgage with a 3% down payment. You can even get down payment assistance from local sources.
For First Time Home Buyers
Fannie Mae also offers first time home buyers a 3% down payment option. Known as the 97% Loan to Value mortgage, or the Fannie Mae Standard loan, it allows first time home buyers at any income level to apply. And by first time home buyers, Fannie Mae means anyone who has not lived in a home they owned in the past three years.
Advantages Of Buying A HomePath Home
There are lots of great reasons to consider a HomePath Home for your first home purchase.
Homes Are Priced To Sell
If a home was originally purchased with a qualifying mortgage, Fannie Mae probably purchased that mortgage from the originating lender. If that owner defaulted, and signed the deed in lieu, Fannie Mae will offer the home for resale. Remember, Fannie Mae is in the business of buying mortgages from lenders, not managing properties. Fortunately, this means that it prices homes at a discount so that they sell quickly.
Low Down Payment
Even better, if you apply for a HomeReady or a Fannie Mae Standard mortgage for first time buyers to buy a HomePath home, you’ll only be required to make a 3% down payment, whether you are a first-time buyer or a repeat buyer. You can even use the Chenoa Fund, Community Seconds, or local resources for assistance in putting that down payment together.
Renovate With A HomeStyle Renovation Or HomeStyle Energy Loan
If you find a HomePath home in need of renovations, or energy-efficiency upgrades, you can borrow that money upfront with a HomeStyle Renovation or HomeStyle Energy Loan. These loans are issued at closing on the primary mortgage, and they can be up to 75% of the home’s value after the renovations are completed. There’s no second mortgage or HELOC, and your payments are wrapped into one monthly payment.
Cancellable Mortgage Insurance Payments
When you have less than a 20% down payment, you must pay for private mortgage insurance, or PMI, on a conventional loan, or mortgage insurance premiums, or MIPs, on government-issued loans. These insurances are issued for the lender’s protection should you default on the loan. With a HomeReady mortgage MIPs can be cancelled when you reach the 20% equity threshold.
Closing Cost Assistance
If you complete the HomeReady Home Buying course, available online, you’ll receive a credit of up to 3% of the purchase price toward your closing costs when you purchase a HomePath home. The course costs $75, but that money is returned to you when you close on a HomePath home. You complete the course, print out your certificate of completion, and give it to your real estate agent to submit along with your offer. It’s that simple.
Disadvantages Of Buying A HomePath Home
When is a bargain not a bargain? When the “bargain” becomes a money pit.
HomePath homes are sold “as-is.” This means that Fannie Mae will not make any repairs to the property, nor will it offer any warranties. That means that it is up to home buyers to make sure that they understand exactly what they are taking on when they purchase a HomePath property.
You will need a thorough home inspection to be sure that you have a handle on what repairs will be required. To protect home buyers from taking on more repairs than they can handle, HomePath requires prospective home buyers to work with an approved real estate agent. The agent is there to ensure that all known problems are fully disclosed and to make sure you understand exactly what you are getting into.
HomePath Ready Buyer May Be Your Path To A New Home
If you are a lower income or first-time buyer, it’s hard to beat the advantages of participating in the HomePath Ready Buyer Program. Learn more about buying your next home in our Learning Center.