What is Fannie Mae HomePath?
The banking crisis and ensuing real estate market collapse of 2008 made it very difficult for many borrowers to continue making their mortgage payments. A big increase in real estate owned (REO) properties followed. REOs are foreclosed properties owned by a lender, government agency or government insurer like FHA. Fannie Mae — due to its massive footprint in the mortgage market — took possession of many of those REOs. In a strategic effort to reduce foreclosed housing inventory, Fannie Mae executed three core tactics, called HomePath. The aims were:
- Make REO properties easy to find via a website that listed them
- Establish an aggressive, temporary mortgage product to help buyers acquire REOs
- Establish a similarly aggressive, temporary renovation mortgage product that could help move REO homes that needed fixing
As enough time passed, most the ‘dead wood’ of REOs were cleared from the forest, in a manner of speaking. With a healthier housing market, the two HomePath mortgage programs ended in October 2014. The HomePath website is still live.
Below you will find a quick rundown of the HomePath resources past and present, followed by some current HomePath mortgage alternatives.
First, Fannie Mae set up the HomePath website to list and make public all the available foreclosed properties. The site is still live. However, there are far fewer homes available than the early years of the housing recovery. It was always the case that a borrower could finance a REO property with any type of loan for which one qualified. That’s still true today.
During the housing recovery, the HomePath Mortgage resembled your basic, everyday loan program. It was suitable for REO homes that were mostly move-in ready. HomePath loans had a few features that made them very compelling for buyers. They did not require private mortgage insurance nor appraisals. Borrowers did not need perfect credit. Sellers could pick up the tab on 6% of the closing costs.
Only a small 5% down payment was required. And it could can be funded by savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer. Clearly, this mortgage program was set up to be aggressive.
HomePath Renovation Mortgage
For homes in foreclosure that needed renovation or major work, Fannie Mae set up the HomePath Renovation Mortgage. Borrowers of all stripes (homeowners and investors) could purchase REOs and finance 35% of the home’s after-repairs value or $35,000, whichever was less.
The renovation loan had the same lenient loan requirements as the standard HomePath mortgage.
8 Fannie Mae HomePath Alternatives
Did the three-prong HomePath strategy work? Yep! Fannie Mae-owned properties were absorbed back into the market by home owners and investors. While the HomePath Mortgage and HomePath Renovation Mortgage programs no longer exist, there are still several comparable (though slightly less aggressive) alternatives..
Home buyers looking for zero down, low down or renovation loans might should check out the following options.
Zero Down Loans
- USDA Loans – a great zero down option for low to moderate-income borrowers who buy homes in USDA-eligible areas (mostly rural)
- VA Loans – the loan of choice for military veterans, eligible spouses and active servicemembers
Low Down Payment Loans
- FHA Loans – very popular government-insured, 3.5.% down mortgage
- HomeReady – 3% down mortgage for low to moderate-income buyers
- Conventional 97 – 3% down mortgage for first time home buyers, no income limit
- Home Possible Advantage – Freddie Mac’s 3% down mortgage for low to moderate-income buyers
- FHA 203k – government-insured loan program that gives borrowers an ability to purchase and renovate with a single mortgage transaction
- HomeStyle – Fannie Mae’s version of the FHA 203k, a single loan to finance a purchase and renovations