Fannie Mae

Fannie Mae was originally set up as a government agency in 1938 to help Americans purchase their homes by making mortgage funds available at reasonable rates. In 1968 Fannie Mae was turned from a government agency to a federally-chartered enterprise wholly shareholder-owned. Fannie Mae is funded solely with private capital, and is traded on the stock exchange (listed as FNM).

Fannie Mae has recently indicated it is restructuring to bring it back to three key areas. These are:

1. Housing and community development
2. Eliminating homelessness
3. Building thriving neighborhoods in the District of Columbia.

Fannie Mae has pledged to help 6 million families (including 1.8 million minority families) become homeowners for the first time over the next ten years.

The mortgage options offered are designed to help eliminate the most common barriers to obtaining a mortgage:

1. The lack of an available down payment
2. Insufficient income to qualify

Fannie Mae doesn’t actually lend money to people who wish to purchase a home. Rather it makes the mortgages available through a network of lending agencies. These lending agencies then sell the loans to Fannie Mae after closing rather than having to wait 25 to 30 years to recoup their money. This allows the lending institutions to make mortgages at lower interest rates.

Many mortgages offered through the lending agencies offer special qualifying and affordability options, such as:

• Smaller down payment requirements
• Lower income requirements necessary to qualify
• Less mortgage insurance
• Being more forgiving of those with less than perfect credit histories
• Reducing the interest rate charged to those with poor credit histories if they successfully make two years of on time payments
• Helping those who have no past credit history
• Extra flexibility to those with disabilities

Because the mortgage is obtained through an approved loan agency they each have different eligibility requirements. However, it is the norm for a lender to investigate the following before granting a mortgage:

• Credit history
• Employment stability
• Sufficient income (usually less than 36% of your monthly income can be used to service all debt, including the mortgage)
• The property being purchased
• The type of loan sought

Also, the borrower:

• Must be going to use the house for residential use only.
• Must be a US citizen, a permanent resident alien or a non- permanent resident alien with a two year credit and residency requirement
• Have a minimum down payment
• For single family units the mortgage must be less than $417,000 (for most states)

Fannie Mae doesn’t lend money directly, they operate through approved agencies. You can get a mortgage from any mortgage lender authorized by Fannie Mae to offer it. You can apply on-line, in person or over the phone depending on how the institution you are asking for a mortgage accepts loan applications.