How to Buy a Fannie Mae Home and Get Up to 3% Toward Closing Costs

Fannie Mae prevents investors from submitting offers on thousands of foreclosed homes during the first 20 days after they are listed for sale.

There is another benefit. The company may cover up to 3% of the purchase price toward closing costs when you buy one of these homes.

What Is First Look?

Fannie Mae is one of two government-sponsored companies that support a large part of the U.S. mortgage market.

When Fannie Mae takes ownership of a foreclosed home, a special rule applies. Regular homebuyers get priority.

The program is called First Look.

Fannie Mae lists information about these homes online:

https://www.hudhomesusa.org

During the first 20 days, only three groups can submit offers:

• people who plan to live in the home;
• nonprofit organizations;
• government entities.

Investors cannot submit offers during this period. Neither a low offer nor a cash purchase changes that rule.

On day 21, investors can enter the market.

Freddie Mac, the other government-sponsored company, uses the same waiting period for its properties.

Why Does This Program Exist?

After the 2008 housing crisis, the government wanted mortgage companies to give families priority on foreclosed homes.

The idea was to help owner-occupants buy these properties before investors could turn them into rentals.

As a result, buyers who plan to live in these homes received an advantage.

However, relatively few people outside the real estate industry know about the program.

Now Let’s Talk About the Money

Fannie Mae has another program called HomePath Ready Buyer.

Before submitting an offer, buyers complete a free online homebuyer education course.

Afterward, Fannie Mae may contribute up to 3% of the home’s purchase price toward closing costs.

Here is an example.

Home price: $160,000
FHA down payment at 3.5%: $5,600
Estimated closing costs: about $5,000
Fannie Mae contribution: up to $4,800 of those costs

As a result, you could potentially buy the home with approximately $6,000 out of pocket.

Meanwhile, investors cannot compete with you during the first 20 days. In addition, the property may already be discounted because it is a foreclosure.

Why Do Some of These Homes Sit for 20 Days?

Because they are foreclosures.

The previous owners stopped making mortgage payments. They may also have stopped maintaining the property.

Brown carpet. A dead lawn. A kitchen from another era.

These homes are sold as-is. Fannie Mae does not make repairs, and those two words can scare away first-time buyers.

However, you can still inspect the property.

And you should.

Then compare it with a renovated home on the same street. After that, simply calculate the difference.

The Action Plan

1. Visit https://www.hudhomesusa.org/ and select your city. First Look listings display a countdown timer.
2. Find an agent registered with HomePath. Any agent can register, but many do not.
3. Inspect the property before making an offer. “As-is” means exactly that.
4. Complete the Ready Buyer course before submitting your offer. No certificate means no 3% benefit.
5. If the property needs repairs, the same FHA financing used for the purchase may also cover rehabilitation costs.
6. Make your offer on day three, not day nineteen. If the house is in good condition, other families may compete with you. If it looks unattractive, you may be the only bidder.

“Foreclosed Homes Are Ruins”

Some are.

That is exactly why they can sell at a discount.

A property in good condition may receive six offers on the first day.

Meanwhile, a home that needs only paint and about $18,000 in new flooring may sit for three weeks. Many buyers simply cannot imagine what it could look like after renovation.

And that may be exactly the kind of property worth looking at.