Take HomePath financing, which allows home shoppers to buy a Fannie Mae foreclosed home with only a low down payment on a conventional loan. Besides the buyer’s own personal funds, some of the down payment can come in the form of a gift, a grant or a loan from a nonprofit organization, state or local government.
Also, an appraisal is not required (a $375-475 savings), and mortgage insurance is not necessary despite putting down less than 20%.
So how did the HomePath program originate? First you need to understand more about Fannie Mae, which owns the foreclosed homes.
Fannie Mae purchases loans from mortgage lenders (the secondary market), replenishing their funds so they can continue to lend mortgages. Fannie also takes those purchased loans and sells them as mortgage-backed securities to investors on the open market. This further increases the supply of money available for mortgage lending and new home purchases.
The government-sponsored entity ended up with the foreclosures after the housing bubble had burst in the late 2000s. With the large scale of loans going into default, Fannie became the owner of these properties.
HomePath is a way for the GSE to unload these homes in a way that not only helps itself, but also helps consumers find affordable housing.
If you have any questions about this, call 813-707-6200, and my team will be happy to help you with this. Reach us here.