If your past contains bad credit, mortgage lenders aren't exactly beating down doors to lend you money. However, the Fannie Mae Homepath program does allow home loans for people with sort of bad credit--scores as low as 620--when they buy Fannie Mae foreclosure homes. This program is called HomePath, and it permits things that other Fannie Mae loans don't.
- 3 percent down payment minimum with 660 credit score
- Fannie Mae condo requirements relaxed
- Some bad credit okay (no 60-day mortgage late payments in last 12 months)
- High debt to income allowed (45 to 50 percent)
- No mortgage insurance or funding fee required
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Finding a HomePath property and making an offer
Someone's loss can be your gain. Fannie Mae foreclosure homes can be bargains, and the HomePath website lets you search easily for homes by area. Fannie Mae recommends that you get pre-approved for your mortgage before shopping for a home--often they get multiple offers on a property, and pre-approved buyers have an advantage over those who are not.
You can finance the home through any lender you choose when you compare mortgage rates and ask the lenders with the best deals if they are HomePath-approved; it appears that most Fannie Mae lenders are. Finding them should pose no problems.
Investment and vacation homes too!
Most programs give all the goodies to first-time home buyers, purchasing a primary residence. This program, however, works for investors too! Bargain homes with cut-rate financing--what's not to like? There are plenty of homes to choose from, especially in states hit hard by home loan foreclosures and bad credit like Michigan, California, and Florida.
No appraisal is required
You can make your offer through the real estate agent of your choice, but choosing an experienced professional is more important that usual because you'll probably need help determining if a home is a screaming deal. Fannie Mae does not require an appraisal to approve your loan, but you might want to get one to make sure that the home is worth its selling price. You'll probably want an inspection as well. Fannie Mae says that it makes repairs needed to enhance the property's marketability but that all sales are "as-is" and they don't guaranty that everything is in working order or that repair work was done properly. Get an inspection to avoid ugly surprises.
Freddie Mac has a program too!
It's called HomeSteps and there are some differences between it and HomePath. For one, Freddie Mac includes a 2-year warranty on its homes. Freddie has a special "SmartBuy" promotion going on now. Here are some of the details:
Purchase offers for select properties must be dated between May 16 and July 31, 2011
- Must close by Sept. 30, 2011
- Owner-occupied only
- "Select Properties" only
- Freddie pays up to 3.5 percent of your closing costs
The 3.5 percent incentive is based on the purchase price, not the loan amount, and can be used for things like mortgage origination fees, discount points, home inspections and appraisals, and title charges.