If you’re looking to buy a home at a potentially lower cost, consider a HomeSteps property. These are homes owned by Freddie Mac, typically acquired through foreclosure, and they offer unique opportunities for buyers. Purchasing a HomeSteps home can be a great way to secure a property below market value, but it’s important to understand how the process works, what to expect, and any potential challenges. Here’s everything you should know about buying a HomeSteps home.
What is a HomeSteps Home?
A HomeSteps home is a property owned by Freddie Mac, one of the largest mortgage investors in the U.S. When a homeowner defaults on a Freddie Mac-backed mortgage, the property may go into foreclosure and ultimately be repossessed by Freddie Mac. Once repossessed, the home is made available for sale to the public through HomeSteps, Freddie Mac’s real estate sales division.
Key Benefits of Buying a HomeSteps Home
- No Mortgage Insurance Requirement: Unlike other types of properties, Freddie Mac often waives the need for mortgage insurance on HomeSteps homes, making it more affordable.
- As-Is Sales: While sold as-is, many HomeSteps homes are in reasonable condition and may require fewer repairs than other foreclosure properties.
- First Look Initiative: HomeSteps homes offer a first-look period during which only owner-occupants (not investors) can bid, giving primary homebuyers a head start.
The Buying Process for a HomeSteps Home
- Search for HomeSteps Properties
Begin by browsing the HomeSteps website, where you can view available properties by location and property type. You can also work with a real estate agent who has experience with HomeSteps homes to help identify and evaluate properties that meet your criteria. - Home Inspections and As-Is Condition
HomeSteps properties are sold “as-is,” which means Freddie Mac does not make any repairs before selling the home. Because of this, it’s essential to arrange for a thorough home inspection to identify any potential issues. While Freddie Mac may address some basic repairs or hazards, most buyers should budget for any additional maintenance or improvements needed. - Financing Options
You can use traditional financing or pay in cash for a HomeSteps home. Some buyers may qualify for Freddie Mac’s Home Possible mortgage, which offers flexible terms and a low down payment option. Additionally, Freddie Mac does not require mortgage insurance on HomeSteps homes, which can significantly lower monthly payments. - Make an Offer
With HomeSteps homes, the buying process is competitive, especially during the “First Look Initiative” period. Work with your agent to make a strong offer that aligns with comparable properties in the area. Remember, only buyers planning to live in the home can make offers during this first-look period, helping you avoid competing with investors. - Closing the Sale
Once your offer is accepted, you’ll move forward with the closing process. Freddie Mac may provide certain closing cost incentives to qualified buyers, which can help reduce your out-of-pocket expenses. Be sure to work with your lender and agent to complete all necessary paperwork and arrange financing to ensure a smooth closing.
Benefits and Potential Challenges of Buying a HomeSteps Home
Benefits
- Competitive Pricing: HomeSteps properties are often listed at competitive prices, making them an attractive option for buyers looking for affordability.
- Mortgage Insurance Savings: Freddie Mac typically waives mortgage insurance, a significant saving compared to other home purchases.
- Owner-Occupant Advantage: Through the First Look Initiative, Freddie Mac prioritizes buyers who intend to live in the home, giving you a better chance at securing the property without competition from investors.
Potential Challenges
- As-Is Condition: Since HomeSteps homes are sold as-is, they may need repairs, upgrades, or cosmetic work. Buyers should budget for these additional expenses and carefully assess the property during the inspection.
- Limited Inventory: The availability of HomeSteps homes varies by region and market conditions. In areas with high demand, you may find fewer options to choose from.
- Competitive Offers: Despite the First Look Initiative, HomeSteps homes in popular areas may still attract multiple offers. Working with an experienced agent can help you navigate the competition.
Important Considerations
- Budget for Repairs: Since HomeSteps homes are sold in as-is condition, it’s wise to budget for potential repairs. A home inspection will give you a clearer idea of what to expect, but it’s always helpful to set aside funds for unexpected fixes.
- Act Quickly During the First Look Initiative: If you’re an owner-occupant, take advantage of the First Look Initiative and make an offer as soon as possible. This period allows you to bid without competition from investors, giving you a better shot at securing the property.
- Understand Closing Costs and Fees: Freddie Mac may offer closing cost incentives on HomeSteps homes, but it’s important to review all fees and expenses before finalizing the purchase. Speak with your lender about potential costs so that you can budget accurately.
Conclusion
Buying a HomeSteps home offers unique opportunities for affordability and savings, especially for owner-occupants looking to secure a primary residence. By understanding the buying process, benefits, and potential challenges, you can approach this purchase confidently and make an informed decision. Whether you’re seeking your first home or a new investment, HomeSteps properties may be a valuable option to consider in today’s market.
