The REO purchase process begins when the buyer deems that he or she has found a HomePath REO home which is a right match for their occupancy or investment needs.
Even though every market is different, it is not uncommon for HomePath REO homes to receive multiple offers before their deadline. A buyer needs to act in a prompt manner to initiate the purchase offer to the seller (FNMA). A real estate agent acting on behalf of the buyer should be able to prepare the right documentation to submit an offer. A number of factors related to the HomePath property and local market need to considered and factored to determine the suitable offer amount.
The selling agent acting on behalf of Fannie Mae REO department reviews the offer documentation before forwarding the same. If the offer is incomplete for lacking in some needed document or provision, there is very little chance of Fannie Mae reviewing it. Due to this special attention needs to be paid by both the buyer’s agent and the buyer when preparing the offer for a HomePath REO home. As an offer is legally binding, a buyer should consult with the REO listing agent, broker or attorney to review all the documents carefully, before proceeding to submit them.
Determining the Condition of a HomePath REO property
Any hazards they are aware of on the properties they hold in REO inventory are shown on the property listing itself. The buyer can use this info for initial assessment only. They should hire a home inspector to thoroughly check the property to determine any other hazards and repairs needed. Fannie Mae allows a period of 10 days to the buyer of a Homepath property to inspect the property after signing of a contract. Any new issues that show up after an inspection should be carefully reviewed and communicated with the selling agent. These new findings can be used to lower the offer price or renegotiate other terms.
Fannie Mae doesn’t restrict or compel the buyers of its repossessed Homepath homes to use a title, escrow or settlement company of their designation. The buyer can choose any company to handle the escrow, title and closing/settlement aspects of their HomePath purchase.
Fixing up of HomePath homes
All Fannie Mae Homepath properties are sold in “as is” condition. Fannie Mae may choose to make repairs to their properties to increase their value and marketability. A buyer of an REO home must be prepared to make repairs if needed. Some mortgage lenders may not finance properties that are in need of work and fix-up. Such lenders may also ask the buyer to get the repairs done ahead of closing or may require an additional amount in escrow after the closing.
The window to renegotiate a contract with Fannie Mae based on the additional repairs closes right after settlement. Even if an REO home has new paint, roof or carpet doesn’t mean that everything is in working condition. Only a comprehensive home inspection report can discern such worries. Even when a certain amount of work is done on the listed REO property, Fannie Mae doesn’t make any warranties regarding such finished work.
Multiple Offers on a HomePath Home Listing
Depending on the desirability of an REO property and the general real estate market conditions, multiple offers can be expected in Fannie Mae REO homes. When an investor or buyer senses that competing offers may be made on a property they wish to buy, it’s advisable for them to submit their most compelling and best offer the first time itself. If Fannie Mae deems an REO offer to meet their expectations, they may accept the offer right away; but in other cases where they don’t agree to the offered terms, Fannie Mae REO division will propose preferred terms through a counteroffer. Moreover, investors should note that FNMA is under no obligation to agree to any of the offers made on its home listings.
In situations where multiple offers were made on a Fannie Mae REO property, the agency’s department may ask all the parties that made an offer to submit their best and highest offer before a certain date and time. Depending on the appeal of the offer made to them, FNMA may choose to accept or reject the binding offers made on FNMA Homepath properties. Before proceeding to reject an offer, Fannie Mae generally offers a counter-offer with terms acceptable to them.
In negotiations for an REO, an investor or buyer should be patient as rounds of offer – counter-offer between them and the seller. Adjustments and changes occur frequently and should be expected regarding sales price, earnest money deposit, repairs, closing fees and dates on purchase offers made to Fannie Mae REO department. It’s not unusual for FNMA to give offer acceptance just verbally. This protects both the buyers and Fannie Mae in case a third party challenges the transaction.
Owner Occupant Buyers
When a home is purchased by a buyer for occupancy as a primary residence, they are considered to be owner-occupants. Fannie Mae offers owner-occupant buyers of its REO homes special consideration. The “First Look” provision excludes any buyers other than primary residency buyers from submitting offers on Fannie Mae REO listings. Some public entities and designates are the only others allowed to make an offer during the “First Look” period. Investors can still make offers during this period, but they won’t be given due consideration till the completion of the initial 15 days reserved for owner-occupants.
A great number of Fannie Mae-owned homes are eligible for HomePath Financing offered by the agency itself. This REO home financing program is available exclusively for buyers of residential properties owned by FNMA. The specific criteria and guidelines to determine eligibility requirements for HomePath financing need to be understood before seeking this form of a home loan to buy a Fannie Mae REO.
At first glance, it is quite easy to feel overwhelmed by the wide range options available for financing your REO. The trick is to stay calm and then diligently evaluate each unique option to choose the right home loan. While doing initial research, the borrower should talk to multiple lenders to compare their loan offerings. As mentioned above, it’s critical to have sure financing in place before proceeding to search for an REO home.
HomePath lenders are approved to offer this type of purchase financing on Fannie Mae owned residential properties. Most of the home lending institutions and financial companies offer loans under this FNMA program. The buyers who wish to take advantage of this loan program should get pre-approved by contacting a Homepath lender. The mortgage interest rates charged on various HomePath financing programs are quite comparable to the conventional loans.
HomePath Mortgage Requirements
The borrower can choose from fixed-rate, interest only or adjustable rate payment options on their HomePath mortgage loans. Unlike conventional home loans, borrowers with credit blemishes and low credit score can also become eligible. Investors and occupant-buyers can also take advantage of the flexible lending guidelines and qualify for a home path purchase loan.
Buyers will have the option of putting little down payment money to qualify. The required down payment needed to become eligible can be sourced from personal savings or can be one of these: a grant from a non-profit, a loan, assistance from local or state, or a perk from their employer. There is no requirement for a new appraisal. Fannie Mae knows the condition of the properties they have listed for sale and also very well know their market value. This saves a good $400 in closing costs. PMI is also waived, but the borrower needs to make sure that the Homepath lender also confirms the same.
HomePath Renovation Loan Guidelines
Homepath Renovation Mortgage is one of the best rehab loan programs available for real estate investors. Anybody interested in buying a Fannie owned REO home that needs repairs will be well served by gaining an in-depth understanding of the unique features of this loan. They are:
Both the purchase price and the costs for minor/light renovation work can be financed through one single loan. Buyers can take advantage of this loan to buy a property in need of repairs while avoiding bearing the costs from their own pocket. Buyers need to put down very little money to qualify. This down payment money need not be from the borrower’s own personal savings, it can also be a grant or a loan from a non-profit, a government agency or an employer.
For latest lending guidelines for Homepath loans, visit their website or contact one of the Homepath lenders found here.
It’s also advisable to consult a housing counselor to determine your Fannie Mae HomePath Property financing options. For REO buyers who may need down payment assistance, a number of grants and financing options are offered by various non-profit organizations and governmental agencies. FHA and VA loan programs allow very low down payment funding provided the borrower meets their lending guidelines. To know more and make an informed choice, home buyers are advised to seek consultation with a housing counselor in their nearby area. A complete list of qualified housing counselors can be found on HUD website.
How to determine the Homepath financing eligibility of a Fannie Mae REO property?
The logos displayed on the REO property’s listing page indicate the type of financing a specific property is eligible for. Depending on the property’s physical condition, a listed home by Fannie Mae may be eligible for either HomePath Mortgage or its renovation variant.
The financing of condo properties can be difficult with Homepath as the condominium project must meet all Fannie Mae requirements. In cases where the condo unit for sale is an FNMA REO, the property may still be eligible for funding through a HomePath lender.
A number of local mortgage brokers also work with HomePath lenders to expand the mortgage financing options for buyers of bank-owned homes. The borrower should contact a mortgage broker company in the area where the property is located to discuss pre-approval and qualification requirements. Sometimes the entity offering Homepath loan may not be listed on the agency’s website. This can occur as many mortgage firms work as partners with eligible Homepath companies.