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Fannie Offers Incentives to Buyers

By:
Kirk Haverkamp | July 14, 2011

Interested in taking advantage of the current low mortgage rates and housing prices, but aren’t sure you can handle the down payment and other upfront costs? You might take a look at buying a foreclosed property through the Fannie Mae HomePath program.

HomePath offers some very attractive features for house-hunters on a limited budget. To begin with, your down payment can be as little as 3 percent of the purchase price – and there’s no mortgage insurance required. In addition, buyers can get up to 3.5 percent of the purchase price in closing cost assistance through a special incentive program Fannie Mae is offering through Oct. 31.
 
That’s not all. Since Fannie Mae is the one selling the property, it doesn’t require an appraisal in order for it to approve the new mortgage. Buyers can also borrow funds needed for modest renovations to the property and have them rolled into the mortgage.
 

Second homes, investment property eligible

 
Unlike many purchase incentive programs, you don’t have to intend to use the property as your primary residence to qualify for a HomePath purchase – it can be used to buy second homes and investment properties as well. However, the 3.5 percent closing cost assistance is only available on properties purchased as a primary residence.
 
Mortgage rates on HomePath purchases will tend to be a bit higher than those on a regular residential real estate transaction – usually about 1/8th to 3/8th of a percentage point higher. However, this is more than canceled out by the fact that you won’t need to carry mortgage insurance, which typically runs about half a percent of the mortgage balance per year.
 
Of course, you can also avoid mortgage insurance by putting at least 20 percent down on your home purchase. But if you have the funds available to do that, you already have a variety of options available for purchasing a home.
 

Freddie Mac, FHA alternatives

 
Freddie Mac, Fannie Mae’s sibling lender, is offering its own special promotions this summer on foreclosed properties through its HomeSteps program, though the incentives are different. Buyers purchasing a HomeSteps property can obtain up to 3.5 percent of the purchase price in closing cost assistance, same as with Fannie Mae, but also can get a two-year warranty on the property and get up to a 30 percent discount on major appliances purchased for the home.
 
If the down payment is your primary concern, you can also obtain an FHA mortgage with as little as 3.5 percent down. However, such a mortgage through FHA would require mortgage insurance at a rate of 1.15 percent a year and are subject to certain limitations on the maximum loan amount. Of course, with an FHA loan, your choice would not be limited to foreclosed properties, as you would be with the HomePath and HomeSteps programs.
 
For more information, or to search for homes available through the HomePath or HomeSteps programs, go to www.homepath.com or www.homesteps.com.

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