Fannie Mae Loans: A Comprehensive Guide To Fannie Mae Loans

Officially recognized as the Federal National Mortgage Association or FNMA, Fannie Mae is a publicly traded business entity which carries out its operations under Congressional charter because it’s a government-sponsored enterprise otherwise referred to as a GSE.

Fannie Mae was established to encourage homeownership and increase mortgage money liquidity by establishing a second market.    

Fannie Mae was actually created in 1938 at the period of the great depression as one of the new deal.

The company aims at enhancing homes availability and making them affordable for middle-income and low – moderate income United States citizens.

Since Fannie Mae is a secondary market player, they are not responsible for originating loans or providing mortgages to potential homeowners who are looking to borrow.

Rather, Fannie Mae ensures that funds are always available to mortgage lenders such as thrifts, credit unions, banks, and other lenders by buying and offering guaranty of mortgages offered by these lenders.  

So if you’re interested in getting a loan that is supported by Fannie Mae, you’re required to do so through an authorized lender.

Besides the avoidance of subprime loans stated above, lenders are required to meet qualification and underwriting prerequisites that guarantees the creditworthiness of their financing.

Mortgages that are bought and guaranteed by Fannie Mae are known as conforming loans.

Typically, conforming loans attract lower interest rates compared to non-conforming loans or jumbo loans. These other loans are usually not supported by Fannie Mae because they are higher than the limits of its loan size.

Find out the key things to consider before buying a home here.

Learn about the strategic tips to get preapproved for a mortgage here.

Fannie Mae Loans: How To Apply For A Supported Mortgage

Once you find a lender who is qualified to provide a Fannie Mae-supported loan, you will be assisted to complete a Uniform Residential Loan Application.

You will be required to provide financial information and some documentation such as a record of employment, gross income, and statements to support your application like a W-2 Form or Form 1099.

You’re also required to provide a sum of your monthly debt obligations like balances on credit cards, child support, car payments, and alimony etc.

For you to be approved for a Fannie Mae-supported loan, you’re required to have a front-end debt-to-income ratio (DTI) of not less than 28%.

A front-end DTI defines how much of your gross income ends up as housing costs. For instance, if you have a DTI that is too high, if possible, make a huge down payment which will slash your monthly costs.

Fannie Mae requests for a down payment that is at least 5% for a fixed-rate mortgage. But 20% is usually normal.

Furthermore, homebuyers are mandated to meet minimum credit prerequisites in order to qualify for Fannie Mae supported mortgages.

As such the higher your FICO score, the more qualified you are to get the lowest available interest rates.

Loan Modification

As a result of the mortgage meltdown, Fannie Mae has started concentrating on Loan Modifications.

This loan modification modifies the provisions of a current mortgage to assist borrowers in avoiding defaulting which may lead to a foreclosure and then eventually losing their property.

This sort of modification may involve a reduced interest rate and a loan term extension which will trigger a lower monthly payments. Since 2009, Fannie Mae has successfully completed over 1.5 million loan modifications. 

Fannie Mae HomePath

When a mortgage is faced with a foreclosure and Fannie Mae is the owner or investor, or when the home is purchased via deeds-in-lieu of foreclosure or forfeiture, Fannie Mae, makes efforts to sell the home as soon as possible to limit the possible effect on the community.

The Fannie Mae website where investors and homebuyers can search for and make offers for homes they like is HomePath’s mortgage provides buyers financing products for the homes.

In some situations, HomePath Mortgage and HomePath Renovation Mortgage can provide special financing.

These special financings include expanded seller contributions for owner-occupied properties and reduced down payments options for buyers who have several financed homes.    

Home Path solely provides homes that are owned by Fannie Mae and these include condominiums, single-family homes as well as townhouses.

Fannie Mae works with local real estate experts to prepare, maintain and list homes for sale.

Many of the listings have photos, homes descriptions, and other details as well as crime rates, school districts, transportation, and neighborhood information.

The cost of the homes, types and numbers are different depending on the market as well as the conditions of the homes.

While some of the properties require repairs and renovations, others are move-in ready. Each of the homes is offered for sale in an “as is” condition.   

Interested in LendingTree Mortgage? Learn more here.

See the connection between your mortgage and credit score here.

Are you interested in FHA Loans? See the pros and cons of the loan here.

Williams Oleije

Williams Oleije

Williams Oleije is an Inbound Marketer, and a pop culture enthusiast. He's an avid researcher about how digital media is transforming marketing in several industries.

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