There are plenty of houses on the market, but affordable housing in move-in condition is perpetually in short supply.
“Affordable” often is a synonym for “fixer-upper,” and many buyers, especially first-timers, are so cash-poor after closing on the house that critical repairs–a leaky roof or a faulty furnace, for instance–have to be delayed. The postponements tend to turn even small problems into major disasters.
To help meet the need for affordable houses in move-in condition, Freddie Mac, the mortgage buyer, has come up with HomeSteps, which will offer about 19,000 of these houses for sale annually, using real estate agents and brokers who meet Freddie Mac criteria.
The idea of Freddie Mac, or Federal Home Loan Mortgage Corp., selling the houses it owns is not new. Typically, Freddie Mac’s real estate department has an inventory of about 8,500 houses, acquired primarily from people–investors as well as homeowners–who defaulted on their mortgages.
The novelty of HomeSteps is the number of houses the program offers for sale and the fact that it expects to spend an average of $5,000 per house on repairs to get each house ready for the market.
And the name.
“We consumer-tested HomeSteps among renters, and the name was pretty well-received,” said John Czerw, vice president of Freddie Mac’s real estate department, in an interview at the Realtors convention in New Orleans in November.
Surveys had shown that only 8 percent of home buyers were aware of Freddie Mac.
Freddie Mac is one of the two largest players on the nation’s secondary mortgage market, which means that the congressionally chartered company supplies lenders with money for mortgages and repackages those mortgages into marketable securities for investors.
While this assures consumers of a continuous flow of money to buy houses, it also means that the average borrower rarely deals directly with either Freddie Mac or the other major player, Fannie Mae, or Federal National Mortgage Association.
Here’s how the HomeSteps program works:
Every home is ready for immediate occupancy. Many homes will be refurbished with new carpet, paint and vinyl flooring.
The houses are quality-checked to make sure the repairs have been made to Freddie Mac standards; the houses are even cleaned, Czerw said. All the houses are priced based on current market conditions and the value of other houses in the area.
Buyers can obtain mortgages for up to 95 percent of the purchase price. However, they are not required to pay private mortgage insurance. On a typical home purchase, that can save a buyer more than $700 a year.
In addition, HomeSteps can waive the usual appraisal costs involved in buying a home, and there can be lower fees as well. With no mortgage insurance, that could add up to $3,200 in upfront savings, Czerw said.
Let’s compare fees involved in HomeSteps’ special financing with FHA and conventional financing:
– In HomeSteps, there’s a $950 origination fee, a $250 mortgage-processing fee and a $50 credit report. That’s $1,250 total.
– In an FHA mortgage, the origination fee is $973. There is no processing fee. There is a $50 credit report, a $275 application fee, a $250 appraisal fee and $2,912 in prepaid annual mortgage insurance, for a total of $4,460.
– In conventional financing, the origination fee is $950, the processing fee is $250, the credit report is $50, the application fee is $275, the appraisal costs $300 and the annual prepaid mortgage insurance is $712, for a total of $2,537.
So HomeSteps potentially can involve a $3,210 saving over FHA and $1,287 over a conventional mortgage.
HomeSteps also is offering competitive mortgage rates, which are available by calling a 24-hour hot line–972-702-2033. Rates are published every Thursday morning and are effective until the following Wednesday.
Potential home buyers can locate HomeSteps houses in two ways: over the Internet or by phone. The search engine on its World Wide Web site, www.homesteps.com, enables a user to search for specific kinds of houses by location, price and features, such as number of bedrooms or bathrooms.
There is a search function that enables users to create a profile of their desired features in a home and receive an e-mail message when a home matching that profile becomes available in the inventory.
Buyers also can receive a list of available properties by calling 800-972-7555.
If you are a licensed real estate agent or broker, information on becoming a HomeSteps selling agent is available by calling 800-854-9555.
