SANTA CRUZ (August 14, 2010) - We have all heard the stories and read the news about how overwhelmed the mortgage industry has become in its attempt to dispose of homes that have been foreclosed upon or returned to the lenders. After all, ever since banks started loaning money for mortgages, the focus has been on originating loans and then accepting payments. Sure, homes have been the security for these loans but no one foresaw the huge demand to handle the return of so many of them.

In a concerted attempt to speed up the sale of homes that have been returned or foreclosed upon, Fannie Mae is offering an amazing opportunity to anyone who wants to buy a home that Fannie Mae has taken back ownership on. Fannie Mae has named this program HomePath and is providing special financing to anyone who wants to buy one. To qualify for this special financing, a buyer must work with an eligible Fannie Mae HomePath lender and should be pre-approved for the financing prior to making an offer.

Here are the particulars. If the home is to be owner occupied, only 3 percent down payment is needed. If it is to be an investment property, 10 percent down payment is required. Not only is mortgage insurance not required but Fannie Mae will finance any of these properties without an appraisal. Therefore, the value will be based on the purchase price. The condition of the home does not matter. This is especially important because many homes have been left in such poor condition by their former owners that traditional financing is not available. Loan amounts may go up to $625,500, the seller may contribute up to 6 percent of the sales price for the buyer’s closing costs and the down payment may be all gift!

Generally, HomePath financing is not as strict regarding credit scores as traditional financing. The only downside is that HomePath financing carries slightly higher rates than either conventional or FHA financing. For example, this month, the 30 year fixed rate for owner occupied homes has been as low as 4.375 percent for both conventional and FHA financing; however, for loans with less than 20 percent down, the mortgage insurance premium adds approximately another 0.50 percent to bring the effective rate to 4.875 percent. For a HomePath loan with 5 percent down, the 30 year fixed rate this week has been 5.125 percent.

This is not a program that requires the homebuyer to be a first time homebuyer and there are no maximum income limits. To be in a position to take advantage, start the homebuying process by working with a HomePath lender, get your loan approved in advance, find a professional, hard working real estate agent and then preview Fannie Mae’s website: www.HomePath.com to find a list of available properties listed by county. There are currently about 25 – 30 HomePath homes in Santa Cruz County that are available for purchase.

This column is written every Saturday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 of email him at Peter@SantaCruzHomeFinance.com.