How Do You Buy a Fannie Mae Foreclosure?

To buy a Fannie Mae foreclosure, you find the home on HomePath.com, get a lender's prequalification letter (or proof of funds for a cash purchase), and have a licensed real estate agent submit your offer through HomePath's online offer system. For the first 30 days a home is listed, Fannie Mae takes offers only from buyers who will live in it as their primary residence and from public entities and some nonprofits. Every HomePath home is sold as is, so you pay for any repairs Fannie Mae did not make.

What is a Fannie Mae foreclosure?

A Fannie Mae foreclosure is a home Fannie Mae took ownership of after the borrower on a mortgage it owned lost the home through foreclosure, a deed-in-lieu of foreclosure (the owner signs the home over to avoid foreclosure), or forfeiture. Homes a lender owns after foreclosure are called REO (real estate owned) properties, and HomePath is the name Fannie Mae uses to market and sell its REO homes.

HomePath listings include single-family homes, condominiums, and townhouses, from move-in ready to needing a full renovation. HomePath.com also shows homes Fannie Mae does not own, so look for the HomePath icon; for other listings, you deal with that listing's agent as usual.

HomePath is one of several places that list bank-owned homes; the others are covered in where to find available REO property.

Can you buy a home directly from Fannie Mae?

Yes. Fannie Mae is the seller and signs the contract with you, but offers on HomePath homes are submitted by a buyer's agent registered in HomePath, so you need an agent to make one. No one can buy a HomePath home before it is listed. Fannie Mae uses its own purchase contract, and HomePath suggests having a real estate attorney or agent explain any part you do not understand.

You may pick your own title or escrow company. If you use the title and closing company Fannie Mae selects, Fannie Mae pays for the owner's title insurance policy.

What are the steps to buy a HomePath home?

1. Line up your money. Get prequalified with a lender you choose, or gather proof of funds for cash. Fannie Mae requires one before it accepts an offer, and HomePath recommends uploading it with the first offer.
2. Search HomePath.com. Each listing shows icons for HomePath homes, homes still in the First Look period, and homes sold by auction.
3. Tour the home through "Schedule Tour" on the listing or through the listing agent, who also answers property questions.
4. Have your agent submit the offer online. Register in HomePath yourself so you can follow the offer's status. HomePath treats an online offer as binding as a paper one.
5. Answer any multiple-offer round. When several offers come in, Fannie Mae may ask every buyer for a best offer by a set deadline. It weighs owner occupancy, price, financing type, requested seller credits, and closing date, and need not accept any offer.
6. Negotiate and sign. Your agent can accept Fannie Mae's counteroffer, respond to it, or end negotiations. Once Fannie Mae tells your agent the offer is acceptable, HomePath asks the agent to upload the signed contract documents within 48 hours, and under the contract they must reach Fannie Mae's listing agent within 5 calendar days or the offer is void. The contract binds only when Fannie Mae signs, and that date (the effective date) starts the deadlines below.
7. Meet the contract deadlines and close. Changes after signing, such as a later closing date, go on a Fannie Mae Amendment form from the listing agent.

What deadlines does Fannie Mae's contract set?

Fannie Mae's contract says time is of the essence, meaning every deadline is strict. These dates come from the sample contract HomePath posts (Form 001); check the version you sign.

For a condo or planned development, you get the association's governing documents at your expense within 10 days and must give written notice within 15 days if you disapprove them, or you are treated as accepting them. Switching lenders after signing lets Fannie Mae renegotiate or cancel, so choose your lender before the offer.

How does the First Look period work?

For the first 30 days after a HomePath home is listed, Fannie Mae accepts offers only from buyers who will make it their primary residence and from community-minded organizations (public entities and some nonprofits). The listing shows a First Look icon and a countdown. A second home or vacation home does not qualify, and investors must wait until the period ends.

To buy as an owner occupant, you sign Fannie Mae's Owner Occupant Certification. In it you agree to:

• Move in as your primary residence within 60 days after closing. If you document renovation financing before closing, the lender's repair timeline applies instead.
• Live there for at least one year after moving in, unless Fannie Mae accepts documented circumstances beyond your control or waives the rule in writing.
• Pay Fannie Mae $10,000 in liquidated damages, plus its attorney fees, if the certification is false, for example if you rent out the home. In a 2-4 unit property you may rent the units you do not live in.

At least one buyer must be a person. An offer in the name of only an LLC or corporation counts as an investor offer. If your move-in will slip past 60 days, email Fannie Mae's First Look team at fanniemae_firstlook@fanniemae.com with the reason and your planned date.

How do you pay for it, and is there closing cost help?

You can use cash or a mortgage from any lender, including conventional, FHA, and VA loans. For an FHA 203(k) renovation loan, the contract must include FHA's required language making the sale contingent on loan approval. Fannie Mae will not accept an offer contingent on selling your current home. Whether a lender will finance a home in poor condition depends on its appraisal and repair rules, covered in using a mortgage to finance an REO property.

Three cost breaks apply to HomePath purchases:

• HomePath Ready Buyer. A first-time buyer (no home owned in the past three years) who completes Fannie Mae's HomeView course before the first offer can request up to 3% of the price toward closing costs. The request and the course certificate must go in with the initial offer, it can be negotiated down, and auction, pool, and investor sales are excluded. The details are in how the HomePath Ready Buyer program works.
• Higher seller-credit limit. On a conventional loan sold to Fannie Mae for a home you will live in with less than 10% down, seller-paid costs are normally capped at 3%. For a HomePath home, the cap is 6%.
• Appraisal credit. When Fannie Mae buys your loan on a HomePath home you will live in, the lender gets a $500 credit and must pass it to you for the appraisal. The loan must go through Fannie Mae's Desktop Underwriter system and include an appraisal.

What does buying "as is" mean?

Fannie Mae may make some repairs to help a home sell, but it sells every HomePath home as is, does not warrant any repair work, and is not responsible for problems found after closing. It may not know about hazards the prior owner never reported, and it discloses only what it knows through the listing agent.

What that means for you:

• Get your own inspection inside the 10-day window, even on a repaired home. Fannie Mae recommends one before every purchase, and the reasons it matters more for bank-owned homes are in why an REO property needs an inspection. You can also ask to see any inspection reports Fannie Mae ordered for itself.
• Put repair requests on the Amendment form. HomePath's offer guide says the listing agent will not review inspection reports you send (unless Fannie Mae asks for copies), so list the items you want repaired or replaced on the form. Fannie Mae never has to make repairs. If it does, its vendors do the work before closing and you get 5 days after notice to reinspect.
• Know what closing means. Under the contract, closing confirms you accept the home's condition and any repairs, and you give up claims about them.
• Buy a home warranty yourself if you want one, since Fannie Mae does not provide it.

For how the foreclosure that put the home on HomePath works from the borrower's side, see what foreclosure is and how it works.