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Investment Opportunity, Look at Fannie Mae

Who’s Afraid Of Fannie Mae?

This weekend the Denver Post featured an article about possible “good deals” of buying a Fannie Mae home.  It explained that they can be offered at a considerable discount because Fannie Mae is trying to unload a large supply of foreclosed homes.  For anyone searching to get that “good deal”, this is certainly interesting.

Good deals come at a cost, though.  Buying from Fannie Mae can require extra time, extra patience, and extra headache.  But, in the end, it could result in the deal of a lifetime.

Why are Fannie Mae homes a Good Deal?

As mentioned, Fannie Mae (and Freddie Mac) have a large inventory of foreclosed homes.  So, they are making special offers like requiring only 3% down (compared to the standard 20% for a conventional loan), and even paying part of the closing costs.

In the Denver Post, they mentioned that SmartMoney.com found Fannie homes in desirable neighborhoods that were a full $100,000 less than the average listing price.  Certainly, a good deal.

What is Fannie Mae?

Let’s start with the basics.  Fannie Mae sounds like a friendly enough name, maybe someone’s Grandma that bakes cookies is the image that comes to mind.  Good Ol’ Fannie Mae.  But, Fannie Mae is just a nick name for the FNMA, which stands for Federal National Mortgage Association.  Fannie Mae is a government sponsored enterprise that was set up to buy loans from lenders so that lenders can in turn… lend more.

So, basically, Fannie Mae can purchase the loan that I have with my bank.  My bank can then lend money to someone else so that they can buy a home too.  Or, in their words, they “provide funds to lenders by purchasing the mortgage loans they make, providing a continuous source of mortgage funds that allows homebuyers to obtain financing.”

This actually did happen to my loan, except it was purchased by Freddie Mac ( also a GSE).   I have been reassured that this is not a cause for alarm, and is a typical part of the lending process.

The fine print of buying a Fannie Mae home

For one, it will change the search strategy if you are looking to purchase Fannie Mae home.  While there is a large inventory, it is relatively small compared to the entire housing market.  More importantly, they are all foreclosed homes and they are being sold “as is.”

Also, the closing process is different.  Our exclusive buyer’s agent who recently closed a Fannie Mae home in Steamboat springs described that it took 6 weeks just for Fannie Mae to sign the contract!  That is a long time to be in home buying limbo, and will certainly require endurance.

Our exclusive buyers agents will help you through this process.   If you are interested in beginning a search for a Fannie Mae home, contact us today.