If you’re a first-time homebuyer, you’ve probably never carried out a financial transaction this big. So it’s understandable that you’re looking to save a few bucks wherever possible, as the combination of a down payment and settlement costs can be a major drain on your cash reserves.
One great option for new buyers is to consider HomePath properties. These are homes that are owned by Fannie Mae, the government-sponsored mortgage-securitization firm, as a result of when those using Fannie Mae-backed mortgages are forced to foreclose on a property. The company then resells the homes as quickly as possible and usually at a discount. One of the benefits that helps to make a HomePath property worthwhile is that it can be purchased for as little as 3 percent down…with the opportunity to receive a 3 percent markdown in the process.
So yes, that means essentially no down payment. How is this possible?
Consider that you’re looking at a HomePath property that’s listed at $300,000 with a required down payment of 3 percent, which equates to $9,000. Considering that the average down payment is around 10 percent (differing based on a number of factors), you’ve already gotten a great deal. However, if you present your offer through a realtor and request a 3 percent credit, Fannie Mae will give you that credit. This means that they take 3 percent of the home’s selling price—again, $9,000—and decrease your initial payment by that value. This isn’t technically “writing off the down payment,” but the value of your savings makes that the essential purpose.
A home in the $300,000 range typically has closing or settlement costs of around $10,000. That will be the final total you’ll be required to pay before moving in.
Consider what this would have cost otherwise. If you hadn’t received the 3 percent credit, you would have paid $19,000. If this wasn’t a Fannie Mae HomePath property at all, and you had paid a more typical down payment ($30,000) plus the settlement costs, you would be giving more than $40,000 before you took residency.
Granted, there are some requirements for potential buyers to take before they can take advantage of the HomePath program. You must sign up for the Homebuyer Education Course offered by Fannie Mae. This will cost $50, and can be taken online. If you go under contract on a Fannie Mae-owned property, the company will reimburse the costs of taking the course.
If you are interested in pursuing a HomePath property, take the course before you start shopping. Fannie Mae’s goal is to sell these previously-foreclosed homes as quickly as possible and, with down payment offers like the ones we discussed, it’s no surprise that these properties go quickly. If you’ve taken the education course and see a home you like, speak with a realtor and jump on it quickly.
Primary Mortgage Residential wants to help you get into a new home, and we offer a variety of resources to help you understand the financial process and how to get the best deal on your way to that home. Use these options to get expert tips on home-buying and shopping for loans.
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