Posts Tagged ‘foreclosure loans’

Fannie Mae paying closing costs on HomePath

April 13, 2011

Breaking news… starting April 12, 2011, Fannie Mae is paying 3.5% of the purchase price towards a buyers closing costs when the buyer purchases a HomePath eligible property.

Great!… but what is a HomePath property?

HomePath properties are Fannie Mae owned foreclosures. This plan to pay 3.5% of a buyers closing costs is designed to encourage qualified buyers to get into the market and purchase some of these foreclosed homes.

What does one need to do to qualify:

  • get prequalified for a loan (credit, income, down payment)
  • plan to reside in the home as one’s primary residence (closing cost incentive not eligible on investment property purchases)
  • close on the HomePath property on or before June 30, 2011

Starting from the day of this post, you have 6 weeks to find the property, and then another 4 weeks to close on the loan before the end of June. That is sufficient time, but not a ton of time. Also like other credits and incentives, the closer we get to the end date, the busier things tend to get.

In other words, start early! To get started, contact me to be prequalified to buy a home as long as the property is in the state of Georgia. The next step would be to find a home, and you can search for HomePath properties at

Free money to your closing costs! How can one go wrong with that!?!

Contingency Reserve Requirements on Renonvation Mortgages

March 15, 2011

I’m staying with the “renovation” theme from my last several posts. This week I want to address a common question I get regarding one of the requirements on the Fannie Mae HomeStyle Renovation Mortgage, Fannie Mae HomePath Renovation Mortgage, and the FHA 203k Mortgage… “Why do these programs require a 10% contingency reserve?

The first thing I should do is define a contingency reserve. Fannie Mae and HUD (FHA loans) require a 10% contingency reserve on these renovation mortgages for unforeseen costs associated with the project.

The last thing anyone wants is to get into a renovation project on a tight budget with no additional assets and an unexpected problem occurs. Some potential issues that arise during a renovation cannot really be accounted for until the process is underway. That is why the 10% contingency requirement exists.

The contingency reserve is not an option. Since this is the case, a better question becomes “what happens to the 10% contingency reserve if it isn’t used?

As anyone who has gone through a renovation project on a home knows, most of the times costs end up going over budget, so it probably won’t be a problem. πŸ™‚ In the event there are funds remaining, usually one of the following occurs with these three programs (203k, HomeStyle, HomePath):

  • additional work on the home – in some cases, the contingency reserve could be used to fund additional work on the home. If this isn’t allowed, then the other option is a…
  • principal reduction – the remaining funds are used to pay down the loan balance. Depending on the renovation program (and lender originating the loan), the borrower could request a recast of the mortgage. In other words, re-amortize the mortgage to lower the monthly payment
  • receive the contingency reserve as cash back – this is typically not an option for the borrower

Contingency reserves can be annoying, but they are definitely needed. As previously stated, the last thing anyone wants is to get near the end of the project and run out of money. What happens then? That is a scenario you never want to face!