What is Fannie Mae's HomePath Program?
The Bottom Line
Fannie Mae’s HomePath program offers bargain hunters the opportunity to purchase foreclosed homes at discounted prices, with flexible financing options like low down payments through programs such as HomeReady and HomeStyle Renovation loans. Buyers should be prepared for as-is properties that may require repairs and act quickly during the "First Look" period, which prioritizes primary residence shoppers.
Bargain hunters shopping for groceries or furniture should clip coupons or wait for the next big sale.
Bargain hunters shopping for a new home should check out Fannie Mae’s HomePath website.
HomePath can lead buyers to discounted home prices and more flexible financing plans, creating a way to save on a new home that’s sold “as is.”
Understanding HomePath Properties
HomePath is a national database that includes homes Fannie Mae has repossessed and is now re-selling. Buyers can search these listings, find a home they’d like to buy as-is, and make an offer.
Fannie Mae exists to regulate and standardize conventional home financing — not to own real estate. This means Fannie can be a motivated seller. Buyers could pay less for a HomePath home when compared to shopping homes priced at market value.
But HomePath properties sell as-is, which means buyers may need to budget for repairs. Some homes will need only cosmetic repairs; others may need entire systems replaced. Fannie Mae won’t be making additional repairs to listed HomePath properties, so buyers should factor the cost of repairs into their offers.
To find HomePath homes in your area, visit Fannie’s database and enter your location in the search bar. Note: Not every home listed is a HomePath home; use the “Listing Type” filter to narrow search results.
Eligibility Criteria for HomePath Buyers
Anyone with a free online account can make an offer on a HomePath listing. Real estate investors who plan to rent out the home or current homeowners who want a second home or vacation property can make offers alongside buyers searching for a primary residence.
Primary residence shoppers can get first shot at some HomePath homes. Listings with the “First Look” icon are available only to buyers who plan to live in the home themselves. These listings will include an end date for the “First Look” period.
After a home’s First Look period expires, primary residence buyers can still make offers, but they’ll be competing with everyone else, including investors.
Primary residence shoppers may also qualify for special Fannie Mae financing options that make it easier to get mortgage approval.
Financing Options for HomePath Purchases
Fannie Mae sponsors several loan programs designed to help shoppers finance homes they find on HomePath. Private lenders issue most mortgage loans, following Fannie Mae’s guidelines. Fannie Mae-sponsored loans include:
Fannie Mae’s HomeReady Buyer Program
Lower-income buyers who find an ideal HomePath home can pay only 3 percent down on a Fannie Mae-backed conventional loan through the HomeReady program. To benefit from a HomeReady loan, borrowers must earn less than their area’s median income, which they can find on Fannie Mae’s lookup tool.
One of the home’s buyers must be a first-time buyer, meaning they haven’t owned a home within the past three years. If both buyers are first-time homeowners, Fannie Mae requires an online education course through its HomeReady First program.
In addition to the favorable loan terms, HomeReady buyers may be able to claim a $2,500 credit to help with the down payment or closing costs.
Fannie Mae HFA Preferred Buyer Program
This Fannie Mae program aligns with loans offered through state Housing Finance Agencies (HFAs). State HFAs can connect low income buyers with down payment assistance loans and grants.
Typically, the loan application process begins with the state HFA and not with a private lender. There’s no first-time buyer requirement, and borrowers who earn 80 percent or less of their area’s median income can pay lower private mortgage insurance (PMI) rates.
Fannie Mae HomeStyle Renovation Loans
Many HomePath listings will require renovations and repairs, making Fannie Mae’s HomeStyle renovation loans a good idea for some borrowers. HomeStyle is designed to finance fixer-uppers. These loans combine home purchase and renovation costs into one mortgage.
At least 75 percent of the loan must go toward the purchase price, leaving the other 25 percent of the loan amount for renovations. If the borrower is planning DIY renovations, 90 percent of the loan amount must go toward the purchase price.
Like Fannie’s HomeReady and HFA Preferred borrowers, HomeStyle borrowers can put as little as 3 percent down, and first-time homeowners must complete an education course.
Fannie Mae Loans vs. Other Loan Types
HomePath buyers don’t have to use Fannie Mae-backed loans to finance their purchase. They could pay cash for the home or use government-insured mortgages, including FHA, USDA and VA loans:
USDA and VA borrowers can pay nothing down, but these programs aren’t open to everyone: Only military members and veterans can use VA loans; only low- to moderate-income buyers in USDA-designated rural areas can use USDA loans
FHA loans are open to all borrowers and designed to help buyers with lower credit scores get approved. Typically, a borrower with a FICO score of 580 can get approved. Fannie Mae-backed loans require a score of 620 or higher. FHA loans can also accept higher debt-to-income ratios. They require only 3.5% down for most borrowers
FHA loans offer comparable benefits to Fannie Mae’s low down payment options. One of the biggest benefits of a Fannie Mae loan: The ability to cancel private mortgage insurance (PMI).
Most FHA loans continue to charge mortgage insurance premiums throughout the life of the loan. On a conventional loan backed by Fannie, homeowners can cancel PMI when the loan balance reaches 80 percent of the home’s value.
Step-by-Step Guide to Purchasing a HomePath Property
Here are the steps to getting a home through the HomePath program:
Step 1: Get Pre-Approved For the Loan
Before choosing a property to buy and making an offer, find out whether you can afford the home. Getting pre-approved for a mortgage is a fast way to find out.
Pre-approval shows whether your personal finances would support a home loan. If you do qualify for a loan, pre-approval will also show the maximum loan size and estimate how much you’d pay each month.
Mortgage eligibility depends on the borrower’s income, other debts, and credit score. You can learn more about the pre-approval process here.
Step 2: Visit the Homepath Portal and Look At Homes
Bargain hunters can filter by “Listing Type” to see only HomePath homes when they search the HomePath database. HomePath homes are usually the best deals since they’re homes Fannie has repossessed because of foreclosure or deed in lieu of foreclosure.
Buyers can also change the Listing Type to see only First Look homes. These HomePath homes are set aside, temporarily, for shoppers who are looking for a primary residence.
Clicking on a listing will show property details, location, photos, and contact information for the listing agent.
Step 3: Make an Offer, or Ask Your Realtor to Make the Offer
After visiting the home and seeing its condition firsthand, buyers can make an offer on a HomePath home online. Clicking a listing’s “Make an Offer” link will prompt the buyer to create a free HomePath account or to log into an existing account. Buyers can also get their buyer’s agent to set up an account and make the offer.
Fannie, of course, has the right to reject offers, but buyers can make repeat offers.
Step 4: When Offer Is Ok’d, Work With Your Lender to Finalize the Loan Application
A qualified Realtor and lender will make homebuying easier by guiding the buyer through the details of finalizing the purchase.
Buyers who plan to use the home as their primary residence can put as little as 3 percent down and get help with closing costs and down payments. Or, borrowers who struggle to qualify for a conventional loan may be able to get FHA approved.
Hundreds of private lenders offer Fannie Mae loan programs along with FHA, VA, and USDA loans. Buyers usually get the best deals when they compare lenders and loan types rather than taking the first loan offer they can afford.
Buyers should compare rates with at least three lenders. Learn about today’s rate climate here.
Pros and Cons of Buying a HomePath Property
Shopping on HomePath isn’t for everyone. Here are the pros and cons:
HomePath Pros
It’s a way to save: Bargain hunting on HomePath can lead to, well, bargains. Shoppers who monitor the site for a few weeks start to get a sense for the best prices and whether a home is worth making an appointment to see
Less competition: Investors and first-time homebuyers often compete for the same properties in their local markets. HomePath’s “First Look” feature insulates first-time buyers from this competition by accepting offers only from buyers who plan to live in the home
A chance to remodel: Some HomePath homes need renovations and repairs. Buyers who enjoy fixing up or redesigning their residence use HomePath as a source for fixer-uppers
HomePath Cons
Limited inventory: Some local markets have only a handful of HomePath properties nearby; others have none. HomePath inventory won’t usually reflect the full scope of a local housing market
Homes sold as-is: Fannie Mae will do some repairs to homes before it lists them on HomePath, but once they’re listed, homes sell as-is
Limited timeframe for buyers: The “First Look” period gives primary residence buyers an advantage by holding off bids from investors and second home buyers, but this period typically lasts only 30 days. Buyers will need to decide whether to make an offer quickly
Common Misconceptions About HomePath Properties
Buyers might hear misconceptions about HomePath properties. Here’s what is true:
Not Every HomePath Property is a Bargain
For one thing, many HomePath homes need repairs. These will be the buyer’s responsibility, cutting into the potential for savings. Also, not every home in the database is a foreclosure. Be sure to filter search results to see only HomePath homes.
Shoppers can find bargains on HomePath, but the home’s appearance in the database doesn’t ensure it’s a great deal.
Homes Aren’t Begging for Buyers
Some buyers have the idea that foreclosed homes sit on the market for years waiting for someone to come along to make an offer. In reality, most repossessed homes don’t stay on the market long. Competition can be fierce on HomePath, especially after the First Look period expires.
Buyers should know the home’s worth and a ballpark amount of money they’d need to repair the home before making an offer.
HomePath Homes Aren’t Trashed
Many properties in the HomePath portal will need repairs, especially cosmetic improvements. But Fannie Mae isn’t selling homes with rotten subflooring or failing roofs.
Buyers can find safe and livable homes in the database. In fact, to be eligible for a Fannie-backed mortgage, the home would need to be safe and livable.
Get Pre-Approved so You’re Ready
It’s smart to get pre-approved so you know how much you’re qualified for. Then, you can make a solid offer on a home. Fannie Mae won’t consider offers without a valid pre-approval
