With nearly 150,000 foreclosed homes on their books, Fannie Mae and Freddie Mac are trying to pare down their growing inventory of repossessed properties, in turn providing home buyers with tremendous purchasing opportunities.
MAKING SENSE OF THE STORY
- An analysis by SmartMoney magazine found that home buyers could save $100,000 on the price of a home by purchasing a foreclosed home owned by Fannie Mae or Freddie Mac as opposed to a similar fair-market property just a few blocks away.
- Fannie Mae’s homebuying program, which requires down payments as low as 3 percent on 30-year mortgages also can help buyers save money. However, buyers should note, smaller down payments generally translate into higher monthly mortgage payments.
- Another bonus to purchasing a Fannie Mae-owned home, the company doesn’t require private mortgage insurance, which most lenders require for buyers who put down less than 20 percent.
- Unlike many foreclosed properties, which usually require many repairs, Fannie and Freddie generally repair items such as leaky roofs and damaged electrical work, and often handle small projects like replacing appliances that are broken or missing, replacing old carpet, or fixing damages left by the former owners or vandals. Additionally, Fannie Mae’s properties come with an optional mortgage that includes extra financing up to $30,000 for repairs and improvements.
- Buyers of Freddie Mac homes who plan to be owner-occupants –those who plan to live in the home and not use it as an investment property—have the advantage of viewing properties 15 days earlier than investors who often pay all cash and buy up foreclosed properties before owner-occupants have a chance to view them.