Qualify for a Fannie Mae Loan
The name sounds downright homespun and the mission is, too: Help mortgage loan seekers get underwriting so they can own a piece of the American dream. Of course, Fannie Mae--the Federal National Mortgage Association's nickname--didn't start out as a private lender or a guardian committed to sleuthing out mortgage fraud. Congress mandated its existence in 1938 to lend stability to a volatile secondary housing market. The agency is still overseeing the disbursal of mortgage loan money despite the ebb and flow of contemporary financial meltdowns.
Instructions
1. Have a complete understanding how Fannie Mae works before you apply for a loan. Fannie Mae doesn't actually give people mortgage funds so they can finance home purchases. Instead, it gives cash to banks and other lending institutions so they can make mortgage loans to people like you. Banks get to keep their money or use it for different purposes because Fannie Mae is, in every sense of the word, their banker.
2. Check with Fannie Mae to get the agency's most up-to-date mortgage loan limits. When Congress made changes to FNMA in March 2009, it followed the Federal Housing Finance Board's lead and set a limit of $417,000 as the most amount of money a lending institution can underwrite using Fannie Mae guidelines. The only exceptions are Alaska, Hawaii and the U.S. Virgin Islands where higher cost-of-housing prices allow the borrower to get 50 percent more than that figure.
3. Start the application process by rounding up your financial paperwork. You must be in a position to verify critical background information such as your last few years of steady employment and that of your spouse, if applicable. Self-employed? You will be required to provide balance sheets and financial statements that speak to the health of the company you own outright or in which you have at least a 25 percent stake. Your debt-to-income ratio, which until the 2009 changes was under 28 percent, can now be as high as 31 percent. For qualifying purposes, you may seek the help of a co-signer if your credit rating isn't as strong as you might wish. Your co-signer must accept responsibility for your mortgage by signing a promissory note even if he or she isn't taking title to the property.
4. Be aware of the fact that the amount money you seek to finance will have a big impact on the interest rate you are charged by Fannie Mae. Putting down a minimal payment may seem like a great idea at first, but in these financial times, a burdensome mortgage payment can come back to bite you in the future. The heftier your down payment, the more likely your chances of qualifying for a Fannie Mae-backed mortgage.
5. Verify the fact that your bank or mortgage company is sanctioned to administer the Fannie Mae program once you have located a sweet house and a willing lender. Fill out the paperwork but keep an open mind if you've experienced credit problems of late. In 2009, Fannie Mae tightened loan criteria so if your credit score is below 580, you may not qualify from the get-go. Happily, Fannie Mae instituted a streamlined processing system in 2009 so if it's currently in place, the Desktop Underwriter#xAE; platform will get you a yea or nay response fast. Ask the lender if they are aware of this program.
6. Expect your property to be appraised once your paperwork begins to jump qualification hurdles. There's nothing you can do to help or hamper this part of the process. Fannie Mae's final approval will be contingent upon an accurate and reliable appraisal that meets a daunting list of guidelines. Even the appraiser is required to be licensed and certified by Fannie Mae if the estimates are to be accepted by the agency.
7. Ease your concerns about traditional Fannie Mae insurance issues. The 2009 modifications have been eased so even folks who are financing or refinancing a home that's more than 80 percent of the value of the property can qualify without having to add extra coverage. As a matter-of-fact, Fannie Mae is permitted to refinance loans up to 105 percent of a home's value in some situations with no insurance add-on. That said, nothing's set in stone and some of the policies noted are set to terminate in 2010.
Tips Warnings
If you need information about your Fannie Mae-backed mortgage application, call the agency at 1-800-7FANNIE 8 a.m. and 8 p.m. EST or visit http://www.fanniemae.com/homeaffordable. When considering a mortgage applicant, Fannie Mae doesn't differentiate between those looking to buy a principal residence, a second home or investment property, so don't let the fact that you won't be living in the house you purchase stand between you and Fannie Mae.
Corporations and businesses are excluded from buying property backed by Fannie Mae. So if you're seeking a mortgage in the name of an LLC or other type of corporation, look elsewhere.
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