Fannie Mae's national lending program HomePath is worth a look
If you fit the profile -- typically buyers with little cash on hand or small-scale investors looking for a deal on a foreclosed house -- a little-publicized national lending program could be just what you need this fall.
Here's what it offers:
-- Minimal down payments -- 3 percent for buyers who plan to live in the house, 10 percent for investors. Most of your down payment can come from documented gifts from relatives or others with no direct connection to the transaction.
-- No requirement for an appraisal on the property unless you're applying for additional money to renovate the house. This is crucial because low-ball appraisals can be deal-killers, especially when the house needs repairs.
-- Generous "seller contribution" limits of up to 6 percent of the price, effectively reducing the cash you'll need to pay closing costs.
-- No requirement for mortgage insurance coverage, despite your high loan-to-value ratio at purchase.
-- Credit score minimum of 660 -- significantly lower than the 700-plus scores many lenders now demand for conventional loans on favorable terms.
-- Maximum loan amounts tied to standard conventional loan limits: $729,750 in the highest cost markets, $625,500 in some others, and $417,000 everywhere else.
Who is offering such an unusual package of come-ons like this in an era of strict underwriting requirements? It's Fannie Mae, the mortgage investment giant that got into deep trouble when the housing bubble burst and is bleeding red ink in prodigious quantities under federal conservatorship.
As a result of its past problems, Fannie is saddled with a bulging portfolio of tens of thousands of foreclosed homes. It needs to sell those houses, is willing to finance their transfer to new owners and has come up with a program it calls HomePath to do so. In recent weeks, HomePath loans have been rolled out through mortgage brokers and a network of 50 lenders, so it's probably available on houses in your area.
The basics on HomePath: The program is restricted to Fannie Mae foreclosure holdings. The full lineup of listings can be viewed state by state at HomePath.com.
Participating real estate brokers are listed on the same site; Fannie Mae will only entertain offers that come through those brokers, not directly from consumers. Most properties are open to bids from owner-occupant purchasers and investors, but some designated "First Look" are reserved for bids from owner-occupants during the initial 15 days after listing.