Homepath financing.

As an REO broker the biggest question I get on a daily basis are “Where are all the REO’s” and “How do I get my offer accepted”?  Well the answer to the first is “Soon, I hope” and the latter is normally “cash”.  But if the seller is Fannie Mae there is an overlooked and underutilized alternative.  It is called Homepath.

Homepath Financing is a form of financing, not a lender.  Most real estate agents are stuck on using their personal lenders because they feel that they trust tham and they will get the loan closed so that they can get paid.  This is a great tactic, but if you aren’t getting your offers accepted, then you aren’t going to have to worry about what your lender can or can’t do.

Homepath Financing has numerous advantages, but the most important of all is the “no appraisal” feature.  This is why this is so important.

Imagine that your client really likes the house, but there are 20 offers and it is listed for $100k.  You know that your client only has $5,000 in the bank, so they can’t go conventional or cash, and they are going to have to go VA.  If you offer $120k to be the highest bidder, the seller is going to reject it because it is “too high” and they are going to select cash, conventional, or someone putting down more EMD or agreeing to pay the difference between appraisal and purchase price. You might as well not even write the offer because you are going to lose out.

Instead you write an offer using Homepath financing.  IT is not FHA, VA, or conventional.  It is its own loan type.  You offer $120k.  You all of a sudden have a great offer because you don’t have to worry about an appraisal, your client doesn’t have to pay for one, and the seller, Fannie Mae, gets to service the loan at the end of the day so they are going to likely accept this offer.  It isn’t magic, its just business, and Homepath financing is a tool that can be used to get your clients in a home and you a commission.

Homepath financing can be done for as little as 3.5% down, and the best part is that investors can do it for as little as 10% down.  If you are an agent reading this then you need to sell this feature to all your investors.  It will increase their purchasing power, as well as your transaction count (if that is important to you).

There are a few caveats about Homepath.  First of all, not every lender can do them.  There is a full list on www.homepath.com.

The only downside is that everyone isn’t going to qualify.  The minimum FICO as of 2010 is 660 and of course, you can only use this type of financing on Fannie Mae properties that state “Homepath financing approved” which is about 97% of them fortunately.

Until the REOs come back and the multiple offers stop, you are going to have to use the tools that are available to make deals happen so that 2010 ends up being your most successful year, and not just the one you stumble through.