If that’s your dilemma, you could apply for a mortgage backed by the Federal Housing Administration (FHA), since it tends to be less stringent with borrowers whose scores are in the 500 to 580 range. You may have to go the extra mile to prove you can handle a mortgage. Trying to get a Fannie Mae loan with bad credit is inherently more difficult, though. You could also make a down payment as low as 3% if you’re buying a house for the first time. Having a higher score can give you access to lower interest rates. A minimum score of 640 is necessary to qualify for an adjustable-rate mortgage (ARM). Prospective homebuyers looking for a fixed-rate mortgage will need a credit score of at least 620. Occasionally those with a good FICO credit score and financial reserves might get a pass. Although there are exceptions, your debt-to-income ratio typically can’t exceed 36% of your monthly income. Securing a loan may be tough if you don’t meet the criteria. Your mortgage lender will look at multiple factors to determine whether you’re eligible for a loan, how much money you’ll be able to borrow and what your loan rate will look like. It’s a good idea to set aside some time to get all of your financial documents in order, including your bank statements and tax forms. To qualify for a home loan, you’ll need to hunt for an approved lender and complete a uniform residential loan application. If your dream home requires a jumbo loan, you’ll have to look elsewhere. That means it backs mortgages up to $647,200, or $970,800 if you’re buying a single-family home in a high-cost area. If that’s the case, you could have access to special perks.įannie Mae only deals with conforming loans for residential properties. You might come to discover that Fannie Mae is behind your mortgage. Is Fannie Mae backing your loan? To find out, simply go to its website and use the loan lookup tool. It does business with so many different lenders that sometimes homebuyers aren’t even aware that Fannie Mae is backing their loan. In exchange, Fannie Mae assumes the risk attached to borrowing and protects these mortgage lenders when homeowners don’t comply with their loan terms. For instance, they must be open and honest when processing subprime loans for people with poor credit and others who fall short of income requirements. In order to partner with Fannie Mae, lenders must go through an application process and meet certain guidelines. And it leaves private lenders with enough security to work with more borrowers. In doing so, Fannie Mae ensures that there’s liquidity in the market, meaning that mortgages can easily be bought and sold. Then, it sells those securities to various investors worldwide. Fannie Mae routinely buys mortgages from banks and other private lenders, puts them together and turns them into mortgage-backed securities. How Fannie Mae FunctionsĪll Fannie Mae loans actually come from outside lenders, as it’s not part of the primary mortgage market. Fannie Mae has backed more mortgages for single-family homes than anyone else in the secondary mortgage market. In fact, Fannie Mae has been a major player in the housing market since its inception back in 1938, in the midst of the Great Depression. In 2021, for example, Fannie Mae provided $1.4 trillion in liquidity to fund the housing market, helping individuals and families to buy, refinance and rent approximately 5.5 million homes. Technically called the Federal National Mortgage Association, Fannie Mae exists to help make homeownership a reality for families across the country, including those that may be struggling to stay afloat financially. When the recession hit in 2008, the government bailed out Fannie Mae along with its counterpart, Freddie Mac.
Chances are, this isn’t the first time you’ve come across the name Fannie Mae.