Tuesday, January 15, 2008

How to Get a Fannie Mae Mortgage

Introduction

Fannie Mae, short for Federal National Mortgage Association, was created by Congress in 1938 to re-establish stability in the housing market at the time. It lends money to lending institutions rather than directly to buyers, which frees up more money for the banks. It was turned into a private corporation in 1968, when the government no longer needed it.

Instructions

Difficulty: Easy

What does Fannie Mae do?

Steps

1

Step One

Essentially they are helping to maintain the secondary housing market, which is homes that are not brand new, but reselling. They also create lower interest rates by creating a larger pool of money from which banks can make loans.
2

Step Two

The government has been working with Fannie Mae to help low- to middle-income families and minority families achieve the American dream of owning their own home. But the privately owned program receives no government funding whatsoever.
3

Step Three

Fannie Mae also works against predatory lending and mortgage fraud. Predatory lending is when lenders offer things to buyers that are not illegal, but not in the best interest of the buyer. Buyers who do not do their research can easily fall into these traps. The lender will try to offer things such as prepayment penalties that will hurt buyers who try to make additional payments to principal, or overly high interest rates. Fannie Mae also guards both the buyer and the lender against mortgage frauds such as fraudulent appraisals and false documentation of employment records or income levels.
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Step Four

In order to qualify for a Fannie Mae loan, you will need to be able to verify your last two years of employment. Those who are more than 25 percent invested in their company are considered self employed and will have to prove the worth of their business as well.
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Step Five

You will also have to be asking for a loan that falls within the limits set each year. This means that you can not borrow more than this loan limit. This allows you to acquire a lower interest rate as well. If you go outside the limits, you will end up with a higher interest rate which can make a big difference.
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Step Six

It's important to make sure the lender you are working with is approved in the Fannie Mae program. Not all lenders can get you this type of loan.
7

Step Seven

To qualify for Fannie Mae loans, you must have a debt-to-income ratio of no more than 28 percent. This means that your monthly debt payments can not exceed 28 percent of your monthly income.

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