Buying a home and shopping around for a mortgage product can be daunting, especially as a first-time home buyer. There is no shortage of home loan options on the market, each with its own set of eligibility requirements, benefits, and drawbacks. Every home buyer wants the best deal possible, but many aren’t sure where to look.
To further complicate things, some investors and first time home buyers opt out of the traditional home purchase process in favor of more affordable homes, such as real estate owned properties, foreclosed properties, and short sales. As it turns out, some financing options simply don’t extend to such purchases, making it hard for borrowers to secure the home loan they need to purchase the home they want. Home buyers can sometimes feel like they have to choose between an affordable mortgage solution and a home they like at a great price point.
Luckily, home buyers can thank Fannie Mae for a home purchase program that may be the solution they were looking for. An evolution of the now-defunct HomePath program that ran from 2009 to 2014, the Fannie Mae Ready Buyer HomePath program serves as a reliable and affordable track to homeownership for both first time home buyers as well as investors looking to flip properties. The Ready Buyer HomePath program has a few awesome benefits worth looking into for borrowers who fit either of those categories and are looking to avoid having to make a large down payment.
What is the Fannie Mae Ready Buyer HomePath Mortgage?
Originally created as an easier way for home buyers to purchase foreclosed homes, the Fannie Mae Ready Buyer HomePath program is a mortgage loan program that has evolved into a viable mortgage solution for first time home buyers and investors. Through the program, home buyers have an opportunity to purchase a Fannie Mae real estate owned (REO) property, with an affordable home loan. Fannie Mae Ready Buyer HomePath mortgages can even be compared to the ever-popular FHA loans in regards to the down payment requirement which is an amazing 3%, .5% lower than its FHA counterpart.
Borrowers interested in the Fannie Mae Ready Buyer HomePath program must also attend a buyer education course, known as the framework course. Participation in the course not only educates first time home buyers and investors on the program, it also prepares them for the home purchase process. Plus, it unlocks an extra 3% back from the lender to be put towards the payment of closing costs. The Ready Buyer HomePath program is perfect for saving on the dreaded upfront costs of buying a home.
While attending a class during the already eventful home purchase process may sound like it isn’t worth the trouble, the framework course is actually an online class that costs $75 to enroll in. Fannie Mae will even reimburse the home buyer for that $75 at the time of closing the loan. Truly, with all of the savings a home buyer stands to make upfront through the Ready Buyer HomePath program, it is more of a no-brainer than anything else.
The program was created with the intention of boosting home buyers confidence in navigating a home purchase. This is accomplished through the combination of the framework class, which educates home buyers on the home purchase process to help them make better decisions, and the 3% back incentive, which drastically cuts down the amount of upfront cash typically needed to close on a mortgage loan. The true genius behind it is that borrowers are only eligible for the closing cost assistance after completion of the framework education course.
How the Fannie Mae Ready Buyer HomePath Mortgage Works
The Fannie Mae Ready Buyer HomePath Mortgage program structure is fairly simple. Home buyers interested in purchasing real estate owned properties (for whatever reason) may already have found the HomePath website. The website allows users to locate any REO properties owned by Fannie Mae. These same properties are the major point of focus in the Fannie Mae Ready Buyer HomePath Mortgage program.
Eligible borrowers who are interested in taking advantage of the savings that the program has to offer need only to enroll in the buyer education course. For $75, home buyers get an online experience that offers education and insights on the intricacies of homeownership and the home buying process. The course is a joint effort between Fannie Mae and a nonprofit founded by the Housing Partnership Network and the Minnesota Homeownership Center, which is simply known as “Framework”.
The Framework course consists of nine 30-minute classes or “sessions” and can be completed in its entirety online. Completion of the course and receipt of the “certificate of completion” qualifies home buyers to receive not only the 3% closing cost assistance incentive but a full reimbursement of the $75 fee for the Framework course. A good note here is that the 3% closing cost assistance is only available to first time home buyers, even though the Ready Buyer HomePath program is highly marketed towards investors as well.
After the course is completed, home buyers are expected to request the closing cost assistance with the offer that they make on an eligible HomePath property. As with other real estate owned properties, home buyers must have a real estate agent make the offer. For home buyers who do not have a real estate agent on hand, Fannie Mae actually offers the contact information of trusted agents on their property page.
The mortgage itself requires a down payment of at least 3%, and with the closing assistance program, home buyers will receive funding equal to 3% of the principal loan balance to put towards closing costs or any other fees associated with the home purchase. Amazingly, no mortgage insurance is required for the Fannie Mae Ready Buyer HomePath Mortgage program, making it one of the most affordable mortgage solutions available.
The actual mortgage is offered as either a fixed rate mortgage or an adjustable rate mortgage, depending on the borrower’s preference and the availability with the lender. Investors are allowed to use the Ready Buyer HomePath loan for up to 20 properties but may not utilize the closing cost assistance program. The program allows down payments to be gifted by a family member (with approved gift letter) or paid through an authorized non-profit organization, state or local government, or employer as either a grant or a loan.
Fannie Mae Ready Buyer HomePath Mortgage Program Guidelines
As we’ve mentioned before, the Fannie Mae Ready Buyer HomePath Mortgage program isn't as complicated as one would imagine. It more or less follows the structure and requirements of a conventional home loan, with a few additional requirements specific to the program. For investors and first-time borrowers interested in utilizing the program, here are the criteria that must be met in order to qualify:
Must have a credit score of no less than 640
Must make a down payment of at least 3%
Borrower must be able to prove at least 2 years of stable employment
Must provide proof of income
Must have W2s and tax documentation at time of closing
Must have no more than one late payment to a debt obligation within 12 months of applying to the program
Must complete the HomePath buyer education course
Must have a real estate agent or broker
Must only purchase a HomePath REO home that is eligible for the program.
In rare cases, eligibility is extended to approved cooperative housing as well as HUD-approved condominiums
Borrowers who intend to buy a home through the Ready Buyer HomePath program should be aware that a lender must check credit scores, and review a credit report for any derogatory items. Lenders will need to verify a borrower’s income using W2’s, pay stubs, bank statements and tax returns. Be mindful that properties must be Fannie Mae HomePath eligible. Additionally, a real estate agent is not only required to make an offer on a real estate owned property but can help you to locate eligible properties. Applicants who are not working with a real estate agent, can be referred to a local agent by Fannie Mae, or the team at Home.Loans!
Additionally, there are extra requirements that must be met for home buyers who wish to take advantage of the closing cost assistance program. To get the 3% incentive, borrowers must meet the following criteria:
Must Complete the nine 30-minute modules of the Framework HomePath buyer education course
A “certificate of completion” must be given in order to receive the incentive
Must complete the course BEFORE an offer is submitted on a HomePath REO home.
Must request Closing Cost Assistance simultaneously with the initial offer in the HomePath Online Offers system
The borrower must be a first time home buyer (has had no ownership of a property within 3 years of applying to the program)
Buyers must occupy the property as a primary residence within 60 days of closing the mortgage transaction
Eligibility is extended to both individual buyers using public funds and tenants residing in tenant-occupied properties
The property must be listed on the HomePath.com site and be eligible for closing cost assistance
As a side note, investors, while welcome to utilize the loan for up to 20 properties, are not able to take advantage of the closing cost assistance benefit. In addition, the program is not compatible with home equity conversion mortgages (HECM), pool sales, or auctions.
Benefits of the Fannie Mae Ready Buyer HomePath Mortgage Program
The Fannie Mae Ready Buyer HomePath Mortgage Program is arguably one of the best ways for a home buyer to purchase a real estate owned property. On top of that, the Ready Buyer HomePath mortgage is also one of the most affordable home loans in existence. All things considered, the program is chock-full of awesome benefits for home buyers.
Affordability is the biggest benefit of all. The program goes toe to toe with even FHA loans, which have some of the lowest down payment requirements for home buyers. While the FHA has a down payment requirement of 3.5%, the Ready Buyer HomePath Mortgage only asks its borrowers to put down 3%.
And while we are on the subject of FHA loans, they definitely start to lose affordability when the mandatory mortgage insurance is factored into the monthly payments. Luckily, the Ready Buyer HomePath Mortgage Program has no requirement for private mortgage insurance. That means home buyers finally have a low down payment mortgage option with no burdensome mortgage insurance to beef up their monthly mortgage payments.
Not to kick FHA loans while they are down, but Ready Buyer HomePath Mortgage makes no requirement for a home appraisal, which is a staple of FHA financing. That's not only another cost that borrowers need not worry about, but also one less thing to slow down the mortgage transaction and hold up closing.
As if that weren't enough, the program is mostly known for its closing cost assistance program, which sees eligible borrowers receive up to 3% of the principal balance back. The incentive is contingent upon the completion of a super educational home buying course that costs $75. But they even reimburse the $75 with the 3%, and the proceeds can cover a variety of fees associated with closing the loan such as prepaid expenses and discount points.
Fannie Mae Ready Buyer HomePath Mortgage Program: In Review
Buying a real estate owned home as a first time home buyer can be a tough decision to make. Even as a seasoned investor, finding a mortgage product that allows this type of home purchase while maintaining affordability is no easy task. Usually, borrowers have no choice but to settle for a standard home purchase, or to use a more expensive conventional loan to finance the purchase.
As luck would have it, all of these problems are solved through the Fannie Mae Ready Buyer HomePath Mortgage Program. The Program is a perfect fit for home buyers interested in buying a real estate owned property. As a matter of fact, investors can use the program to fund the purchase of up to 20 properties. While most other loans of this nature would typically be well out of the average price range of a first time home buyer, the Ready Buyer HomePath Mortgage is actually one of the most affordable loans on the market.
The Fannie Mae Ready Buyer HomePath Mortgage Program only requires borrowers to make a down payment of 3% to qualify, and unlike FHA financing, doesn’t require any mortgage insurance. As if that weren’t enough, first time home buyers can benefit from the awesome closing cost assistance program, which sees borrowers receive up to 3% of the principal loan balance back to be put towards closing costs. The savings that home buyers stand to accumulate are beyond beneficial.
Combine that with a mandatory home buyer education course that helps build confidence and lead home buyers to make the right decisions, and the program easily outperforms most others. If you are interested in the Fannie Mae Ready Buyer HomePath Mortgage Program for the purchase of a real estate owned property and would like to learn more, then we’ve got you covered. All you have to do is reach out to the team at home.loans to get a free consultation.