Federal Homes

Federal Homes

Definition

Homes owned by the federal government due to defaulted loans. Three agencies - HUD, the Dept. of Agriculture, and the Dept. of Veterans Affairs - list repossessed homes for sale.

What are Federal Homes?

Federal Homes

The term federal home can mean different things to different people. It actually encompasses several different categories of housing and loan programs available to the public through federal programs. This can include things like Freddie Mac (otherwise known as the Federal Home Loan Mortgage Corporation), Fannie Mae, VA, HUD and USDA properties. There are all different kinds of federal homes for sale in government foreclosures available around the country. The key is understanding the different options available to you as a home buyer and the potential pitfalls that could come up along the way.

Here is a short synopsis of each of the kinds of federal homes:

  • Freddie Mac: This is a part of the government that supports mortgage lenders by providing stability and liquidity to the market. Freddie Mac does not make loans directly to consumers, but instead purchases loans from lenders so that the lenders are able to continue loaning their funds. Freddie Mac also has its own foreclosed properties division called HomeSteps. Federal home loan mortgage corporation foreclosures are a popular avenue for regular home buyers and investors.
  • Fannie Mae: Fannie Mae is also a government-sponsored entity that assists in keeping the United States housing and mortgage markets stable and liquid. Fannie Mae works within the secondary mortgage market similar to Freddie Mac. They don't make loans to consumers directly, but work with all different kinds of lenders to make sure that they have enough money to loan at affordable rates. Fannie Mae invests in mortgages through debt securities.
  • VA: This stands for the Veteran's Administration. This part of the government guarantees loans made by private lenders when a home is being purchased by a veteran. If the homeowner end up not repaying the loan, the VA is guaranteeing that the lender will be protected. These loans also require no down payment so they are very attractive for veterans to use.
  • HUD: This part of the government comes through a department called Housing and Urban Development. HUD houses come about when a borrower defaults on FHA insured loan. When a borrower purchases a home using an FHA loan, they typically have to pay a monthly mortgage insurance premium. When they defaults against the mortgage, the house reverts back to HUD and is sold off using a HUD approved real estate broker. These foreclosures are very popular.
  • USDA: The USDA loan program is specifically for low income borrowers and others who would choose to purchase properties in more rural areas. There are several different loan programs available on USDA homes. This program runs through the United States Department of Agriculture.

What Are The Qualifications for Buying Federal Homes?

Buying Federal Foreclosed Homes

When buying any kind of federal home, there will be certain criteria that must be met in order to qualify. This varies from program to program, so it's impossible to say that there is a one-size-fits-all approach. For instance, when looking at HUD homes for sale, there are certain things that a person must do in order to qualify for the property. Some of these loan programs will only work for single-family homes while others may be suitable also for multifamily homes.

In general, most of these government programs require that someone has credit but they may not require that the credit score be particularly high. A lot of these properties are in need of repair, so it may be necessary to get a specific kind of loan in order to add in the repair costs. All programs will require that the borrower has steady income and a stable job history.

Can Fannie Mae and Freddie Mac Assist Me in Buying Federal Homes?

Fannie Mae has a great mortgage program for people who want to purchase any of their foreclosure listings. Called HomePath financing, the program has a very low down payment and flexible mortgage terms including interest-only loans, fixed rate loans and adjustable rate mortgages. The down payment is only 3% in most cases and can be given by a variety of different kinds of money including a gift, grant, loan from a nonprofit organization and even from an employer. There is no appraisal required by the lender and no mortgage insurance.

Another perk of this Fannie Mae financing is that it can be used for primary residences as well as investment properties and second homes. A borrower must work with and approved HomePath lender, however.

Freddie Mac has a similar program called SmartBuy. This program pays a home buyer's closing costs up to 3 1/2% and also gives them up to 30% savings on new appliances. In addition, the buyer will receive a limited two-year home buyers warranty on their new property.

Freddie Mac also lists their foreclosures and allows owner occupant buyers the first rights to look at them. Later, these properties are opened up for other types of buyers including investors.

What Are Federal Home Loans That Are Good For Me?

There are many different kinds of loans associated with federal homes that are a great deal. For instance, the USDA offers a unique loan program for properties that are located in certain rural areas. For the home buyer who is willing to live a bit outside of the suburbs, these home deals can be great. With no money down, flexible credit guidelines and no mortgage insurance requirements, these homes can be a perfect fit for many buyers.

Another great loan program associated with the federal government is the VA. If you have served in the U.S. Armed Forces, you may be eligible for a 100% financing VA loan. Of course, there are certain eligibility requirements that must be met with this loan.

When looking to purchase federal homes, there are almost always unique loan programs available. Some will allow you to roll in the rehab and repair costs, if needed. Others will only cover the cost of the property, but may allow for no down payment or a gift. In the end, the government wants to get these homes off their balance sheets as they are not in the property management business.

FAQ about Federal Homes

  • There is a federal relocation assistance program that helps displaced persons find new housing – only if they have to move in response to a federal program (such as a construction project). There is no federal assistance for relocation for foreclosed homeowners.

Go to the Foreclosures FAQ page

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