Fannie REO Property Purchase Agreement Tips

A lot of Realtors have been asking me how to structure purchase agreements for Fannie Mae foreclosures (www.homepath.com).  First, a little background:

• HomePath is a loan program developed by Fannie Mae to sell their foreclosed properties
• In order to make sure a qualified buyer can purchase one of these properties, Fannie has removed the need for mortgage insurance and a property appraisal.  That removes the problem of having to qualify the property along with the borrower.

Sounds great, right?  It truly is if you know the strategies to best help your clients.  Here are a few simple tips to consider:

• Although the program allows for as little as 3% down on owner-occupied property, Fannie charges 3.625 points (3.625% of the loan amount) for that low down payment feature.  At 5% down, the discount points charged are 2.5%.
• Those points won't be a big issue for your client if you negotiate a seller-contribution to closing costs.  The Fannie website is confusing, making you believe that the maximum seller-contribution is 3.5%.  Fannie will actually allow up to 6% contribution on as little as 3% down.
• The down payment for a single family investment property is just 10%.  The seller contribution, however, is reduced to 2%.
• The underwriters for these loans look only at the purchase agreement for clues on property condition.  I suggest keeping any reference to buyer assumption of violations or other negative comments on addendums that are not part of the purchase agreement.

Wells Fargo Home Mortgage is one of just a handful of national lenders authorized to do the HomePath loan across the country.  Please feel free to contact me with any questions you may have.

Tom

Tom Hlavin, Mortgage Banker
"The Power's In Our Partnership"