For decades, renters have become homeowners by utilizing first time house buying programs sponsored by Fannie Mae. Home buying has slowed in recent months, so Fannie Mae has been rumored to be working on a new product that will stimulate the rate of growth for homeownership. Find out which Fannie Mae programs you are eligible for by completing the application form. You will be matched with several Fannie Mae approved lenders that will offer you a free quote and mortgage analysis. Learn more about First Time Buying with Fannie.
by June Bloom
Fannie Mae is a government agency that backs home loans made by many mortgage lenders. This encourages the lenders to extend home loans to people who may have had past credit issues or income problems. Fannie Mae wants to see more Americans from the middle class get affordable home loans, and they are always trying to make it easier for people to get their part of the American Dream. One of the major ways Fannie Mae is doing this is the HomeReady Mortgage program.
Below are some of the vital aspects of the Fannie Mae HomeReady Mortgage program that can help you to get into a new home this year:
#1 Low Down Payment
As with many government-backed loans, Fannie Mae offers a 3% down option with the HomeReady program. This is open to both first time and repeat home buyers. Being able to put down only 3% of the purchase price means that you will have to put down only $3000 for every $100,000.
#2 Extended Family Income Allowed
This is a new Fannie Mae offering. Income from someone in the house who is not a borrower will be considered as part of your income. This means if you have multi generations living under your roof, you may be able to use their income to qualify for a mortgage.
#3 Co-Borrower Flexibility
Not all borrowers must live in the home. For example, parents who will not live in the home may be co-borrowers on the home loan to help their children qualify for a home
#4 Other Income Sources
Rental payments can be considered as an income source to qualify for a loan. So if you have a basement apartment in the house that you rent out, this can be used as income for a Fannie Mae loan.
#5 Low Credit Requirements
Like most home loans backed by the federal government, Fannie Mae loans have a relatively low FICO score requirement. If you have a FICO score of at least 620, you may be able to qualify for a Fannie Mae loan. If you are considering an adjustable rate mortgage, you will need a score of 640. You may be able to qualify for a mortgage even with a lower score, if you off set the deficiency with a higher down payment or a high level of income.
#6 Flexible Debt to Income Ratio
Generally, you need to have a front end debt to income ratio of 28% to qualify for a Fannie Mae-backed loan. The front end DTI will determine how much of your gross income goes towards your housing payments. Some Fannie Mae-backed loans may have some flexibility with this ratio, so check with your lender.
#7 Closing Costs May Be Covered
Depending upon the lender, home sellers, builders and possibly the lender could pay at least some of your closing costs. Some of the common expenses that must be covered during the home purchase process include appraisal, credit report and title expenses.
#8 Mortgage Insurance Required
Most government-backed loans have mortgage insurance requirements. One of them is an upfront premium that is 1.75% of the total loan amount and the other is paid each month. The latter is based upon the loan's length and how much is borrowed. While many homeowners do not like the fact that they must pay mortgage insurance, this requirement makes home loans available to many more Americans. The lender knows that if the buyer defaults, their investment will be covered by the insurance. So, they are more willing to make loans available to people who may not have previously qualified.
#9 Repair Loans Available
Fannie Mae and FHA loans have loan products available for borrowers who need cash to make repairs to the home. The major advantage of this loan, called a 203(k), is that it is based upon the projected value of the home after the repairs are done. As much as $35,000 can be financed for nonstructural repairs, which includes painting and upgrading fixtures and cabinets.
#10 Mortgage Help Available
Many loan servicers with new Fannie Mae loan programs and FHA financing can help the borrower who have suffered a financial problem and are having trouble making payments. Some of the help that is available includes forbearance, which can lower the interest you pay, or possibly extend the term of the loan to lower the payments.
Fannie Mae has designed its programs so that people who have some credit or income problems in the recent past can still qualify for a home loan. It is to the benefit of the US government that the US housing market be as strong as possible, so it does what it can by backing mortgage loans to ensure that more people are able to buy their own home.
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