Fannie Mae Q&A
Fannie Mae Q&A
There are some distinct differences between a traditional home purchase and that of a Fannie Mae Owned Home. Below you will find the most commonly asked questions home buyers like yourself will need to know and understand before you begin the home search.
Fannie Mae Owned Home Buying Process:
Can I do a home inspection on a Fannie Mae home I am considering purchasing?
Yes. In most Fannie Mae transactions, the buyer is allowed to conduct all customary inspections within a specific inspection contingency timeline. There is only one big difference you need to know about the inspection process:
When Fannie Mae “verbally” agrees to your offer, your time line begins. Verbal acceptance means Fannie Mae has approved/agreed to your offer and terms and they are providing the bank addendum document for you to sign. The inspection timeline does not begin when the seller signs the paperwork.
In traditional purchases, the contract allows for a 10day home inspection. In most cases, this rule will apply, unless something else is agreed to during the negotiations. This is not always a standard rule, so make sure you read the fine print to protect your earnest money.
What does “AS-IS” mean?
All bank owned homes come with an “AS-IS” disclosure. Because the home has never been occupied by the current owner, in this case Fannie Mae, they can not provide you with the customary disclosures you would receive if you purchased a home from Mr. and Mrs. Smith. The banks take a position of “AS-IS” as a matter of liability.
The “AS-IS” disclosure is put in place so you, as the buyer, understand you will be purchasing the home, in most cases, without any repairs being done by the seller. Nor will there be any disclosures about the property condition made by the current seller (Fannie Mae).
If during your home inspection you find the condition of the home is not acceptable to you, then you may exercise your right to cancel the contract and your earnest money will be returned 100%.
What if my FHA/VA appraisal requires repairs?
If your appraiser finds repairs that must be done as a condition for your loan to be approved, then you will need to contact the listing agent right away. Fannie Mae will require a copy of the appraisal and it will depend on the type of repairs and the cost to complete the repairs before Fannie Mae will agree to do any work to the house.
You are better off not writing an offer on a house that will require major FHA/VA appraisal repairs. If they are minor repairs Fannie Mae may be more inclined to agree, however, keep in mind, this is case-by-case and could vary from property to property.
What is the First-Look Program?
Fannie Mae requires that all properties be on the market a minimum of 15 days before they will consider any offers from non-owner occupant purchasers. A non-owner occupant by definition is a purchaser who does not plan to occupy the property as their full time, primary residence. This includes second home buyers and all investors. If you are an owner-occupant, there is no restriction on when you can make an offer.
What is a Deed restriction?
When purchasing a Fannie Mae home as a non-owner occupant, Fannie Mae may require you to agree to what is called a deed restriction. This is typically a period of 90 days in which you are not allowed to sell or “flip” the property you are buying for more than 120% of the purchase price. Some Fannie Mae asset managers require the deed restriction on second home purchases as well as all investment purchases. The terms of the deed restriction will be outlined in section 14 of the Fannie Mae bank addendum document.
I have heard I have to sign special Bank Addendums?
Yes, all Fannie Mae properties will require you, as the buyer, to sign their purchase addendum. This document does not replace the Arizona Department of Real Estate purchase agreement, however, it can alter or change the terms of your original offer. This document is made available to you at the time of writing your offer (if it is not, then you need to ask the listing agent for a copy). Fannie Mae requires you to review and sign the bank addendum before they will review your offer. The reason Fannie Mae does this, is so you have time to read and agree to their terms, prior to your offer being presented and/or accepted.
Click here if you would like to review a sample copy of Fannie Mae’s required bank addendum.
When your offer is accepted and terms have been agreed to, Fannie Mae will send you (or your real estate consultant) the official bank addendums to sign. This document will reflect all the terms you have agreed to. Make sure you read this document and proof for any inaccuracies or spelling mistakes. If you are asking for any special concessions or closing costs, please make sure you read section 38 of the Fannie Mae addendum thoroughly. If you find there are mistakes, then you need to address them with the listing agent right away. Any changes must be made now, not during the escrow period.
How long do I have to review and sign the bank addendums?
In most cases, the sooner you sign and return the bank addendums to the listing agent, the better. The listing agent should give you a deadline in their instructions; however, a good rule of thumb is no later than 24 hours. If you are unable to meet the deadline for some reason, make sure you tell the listing agent. Otherwise, Fannie Mae has the right to cancel the offer and move onto the next buyer.
Why do I have to sign an Owner Occupant Certification?
Fannie Mae has implemented a form called an Owner Occupant Certification to ensure proper handling of purchases by non-owner occupants. This form is to help prevent fraudulent transactions where a buyer may say they plan to occupy the property but really have no intention of living there as their primary residence. The Owner Occupant Certification “certifies” that as consistent with your initial offer, you are in fact a true owner-occupant.
What if I decide I want to add or remove someone from the contract paperwork?
Fannie Mae may allow you to make changes to the purchase if the changes are as follows:
If you want to remove a name from the contract paperwork, you must submit a request in writing to the listing agent with an explanation for the change. Fannie Mae must approve the change first before an amendment to the sales contract can be prepared.
You can not add a buyer to the loan or contract at any point during the escrow process. Once the offer is accepted and paperwork has been signed, a change like this will require cancellation of the contract and the new terms resubmitted for approval. You will also be required to submit a new Pre-Qualification form with all qualifying parties.
How long does it take to get a response from Fannie Mae?
If you (or your real estate consultant) have submitted an offer with all the proper documentation as required by the listing agent, most offers will be responded to within 48 hours. If you (or your real estate consultant) fail to follow the instructions given by the listing agent, this could prevent your offer from being submitted to Fannie Mae in a timely manner.
Fannie Mae will never counter your offer in writing. This is vastly different than a traditional purchase. The listing agent will most likely email you (or your real estate consultant), which will be the next best thing to “in writing”.
What happens if there are multiple offers?
If there are multiple offers on the property, you will be asked to provide your “highest and best” offer. If multiple offers are received, it could take several days before you hear a response back. If you do not get your offer accepted, you may have the option to remain in a “back up” position. If anything should happen to the accepted offer, your offer could move into first position. Your real estate consultant can guide you through this process.
How much Earnest Money do I need? Will they take a personal check?
Customary earnest money deposits are 1% of the purchase price. If you are making an offer on a home listed for less than $100,000, you should be prepared to make a deposit of at least $1,000. In some cases, Fannie Mae may counter your offer with a specific dollar amount they want as earnest money. All earnest money deposits must be in one of the following forms: money order, cashier’s check or wired directly to the title company.
Initially, when you make an offer, you may use a personal check to submit with your required paperwork, unless the listing agent has requested something different. Once your offer is accepted you will need to be prepared to get a money order or cashier check payable to the correct title company. If you plan to wire the earnest money deposit, you will need to get the wiring instructions from the title company to make sure your earnest money is applied to the correct escrow. Earnest money must be deposited right away, unless otherwise instructed by the listing agent.
I haven’t decided who I want to use for my loan, can I still make an offer on Fannie Mae property?
Although shopping around for a home loan is always a good idea, you will want to have your loan approval in hand before making an offer on a Fannie Mae home. Depending on the asset manager, they may not even consider your offer without a Pre-Qualification Form. Your loan officer can provide this document to you or your real estate consultant.
What if I have cash?
If you are planning to pay cash for the property, you will need to provide a copy of your bank statement or an official document which supports the offer you are making in available funds. The “proof of funds” must be in your name (or the name of the person/company on the contract) and it must be dated within the last 30 days. In some cases, an exception can be made if you are pulling money from an investment or account that only provides statements once a quarter. Talk to your real estate consultant about this for more information.
Can I choose my own title company?
The short answer is yes, however there are details you need to be aware of so you can fully understand the process. All Fannie Mae listings have been assigned to a specific title company at the time the foreclosure happens. This is to help discover any title issues prior to the home being offered for sale. Sometimes these title companies can be located in another state. Fannie Mae agrees to pay for the customary “seller” closing costs, which includes an Owner’s Title Policy.
In most cases, if you choose to use a different title company, Fannie Mae will not pay for the seller side closing costs, nor will they provide an Owner’s Title Policy. Although you may have your reasons for using your own title company, and certainly that is your right according to the RESPA guidelines, we highly recommend you stick with who Fannie Mae has selected. A lot of issues can arise during the escrow process and the last thing you want to do is add more stress by working with a title company who is not familiar with the Fannie Mae process.
Will the seller provide a home warranty?
Fannie Mae may or may not elect to provide a home warranty. From time to time, they will offer special sales incentives, which may include a home warranty. If you negotiate seller concessions, Fannie Mae might allow you to use part of the concession to pay for a home warranty. This is case-by-case and depends on what is negotiated between you and the asset manager. If it is not clear, make sure you ask the listing agent to clarify how the seller concessions can be used. Some asset managers will not pay for a home warranty no matter what.
What if I want the seller to pay my closing costs?
Before you decide to ask the seller for a concession for closing costs, make sure you ask your loan officer how that will impact your loan. Most FHA/VA guidelines have a cap on how much you are allowed to receive as a concession. At this time, Fannie Mae will not contribute more than 3% of the purchase price towards any buyer side closing costs. From time to time, Fannie Mae will offer a special sales incentive where they may offer more than 3%. Ask your real estate consultant for the most current sales incentives being offered.
The property I am looking at has a homeowners association. How does that work with an REO home?
Some REO companies do not recognize the HOA Condominium/Planned Community Addendum that is used in traditional sales to disclose the HOA information. Fannie Mae is an exception to this rule and will sign the Addendum if there is an HOA in the subdivision where the home is located. Keep in mind, Fannie Mae will agree to pay 50% of any transfer fees charged by the HOA. They will not pay for any other fees and if there is an upfront fee during the escrow process, the buyer may be required to pay this expense.
When a property is foreclosed on, Fannie Mae assumes the monthly, quarterly or annual cost of the HOA expenses from the date they recover the property. If there are any outstanding assessments, Fannie Mae, may or may not pay those fees. Most HOA Companies will try to collect as much as possible of the previous debt owed on the property. Fannie Mae will, at their discretion, decide how much of these fees they will pay. Special assessments for community or property improvements may be prorated and assumed by the new buyer.
If there is a large amount of back HOA dues accrued from a special assessment, you will want to ask the listing agent how those fees will be handled at the time of closing. Condo and townhouse projects tend to be more of an issue than single family homes. Again, it is important to remember that the HOA Company will try to collect as much as possible. This does not mean they are entitled to collect this debt. Make sure you ask your real estate consultant for more information if you are considering purchasing a home with an HOA.
Does Fannie Mae require the property to be rekeyed at the time of closing?
Yes. Fannie Mae takes a very serious approach to this policy and requires all properties to be rekeyed at the time of closing. The cost for the rekey is paid for by the buyer and will be reported on the final HUD settlement statement. The listing agent will order the rekey prior to the official recordation of the property and will make arrangements for you or your real estate consultant to obtain the new keys.
This is a matter of safety and Fannie Mae will not make an exception to their policy. The cost of a rekey is between $120.00 -150.00 depending on whom the listing agent is contracted with for the service. Even if you can have this done for less money, in most cases, Fannie Mae will not allow the buyer to use their own company.