New Fannie Mae Incentives To Make Home Buying More Attractive

Just in time for the holidays, Fannie Mae has introduced some new incentives to make purchasing a Fannie Mae owned home more palatable.  These new incentives apply to homes which Fannie Mae owns and which have been designated for the HomePath program, and they are exciting enough that a few buyers might decide that all they want for Christmas is a house!  Real estate professionals are encouraged to advertise and promote the incentive program using  Home Path approved materials.  Fannie Mae is asking that any promotional materials to be used in connection with these homes be submitted to Fannie Mae for review and approval at HomePathLender_Support@fanniemae.com.

Here's how it works:  For contracts signed after September 23, 2010, and before December 31, 2010, Fannie Mae will pay up to 3.5% of the buyer's closing costs.  The 3.5% can also be used to pay part of the costs of the home warranty.  Additionally, Fannie Mae is also offering a $1500.00 bonus to the selling agent on the home.

The transaction must close within 60 days of the execution of the contract, so it is important to have financing in place before signing.  Also, these incentives apply only to properties that are being purchased as primary residences--no investors or second homes.  To keep everyone honest on this point, Fannie Mae is asking that any person falsely purchasing a home as a primary when really intending to use it as an investment property be reported to Fannie Mae by email.

The great thing about these incentives for properties that are designated HomePath is that they can be used in connection with HomePath financing.  Fannie Mae offers special financing with only a 3% down payment and no mortgage insurance for these properties.  The 3% down payment can come from the buyer's own funds, or a gift from a family member or a grant, or a gift from an employer.  The HomePath Financing program also allows for up to 6% of the buyer's closing costs to be paid by the seller.  With FHA currently requiring a 3.5% down payment and increased MIP, the Fannie Mae HomePath program has no competition.

So let's look at how this could breakdown.  Sam has finished school and gotten his first job.  Now he wants to buy his first house.  His agent finds him a HomePath home with a sales price of $120,000.  The seller agrees to pay 3% of Sam's closing costs.  Using the Fannie Mae incentives, Sam can get the remainder of his closing costs and his home warranty paid for by Fannie Mae.   So all he needs to close is his 3% down payment of $3600. 

But let's say that Sam's dad decides to give Sam the down payment as a belated graduation present.  If the dad gifts the funds of $3600.00 then Sam does not need any money to close.  He can keep his cash to pay for the costs of moving and to purchase some furniture.  And with interest rates at record lows, Sam can have a low fixed monthly payment with no mortgage insurance.  The low fixed interest rate for thirty years means that he will never have to refinance the house, and he can budget a fixed monthly payment while building equity in his own home.

This truly is a great program for the buyer and the $1500 bonus to the selling agent is a terrific incentive to get some of this property sold before the end of the year.  A list of Fannie Mae HomePath homes in your area is available by going to http://www.fanniemae.com/ and clicking on the green HomePath logo on the center right side of the webpage.  Check it out and let me know in the comments section how the program actually works for you if you do take advantage of it.