How to Get Ready for Homeownership and Home Mortgages

It is important to learn about Fannie Mae and how the company assists the housing market if you are looking to make a home purchase. Whether you are purchasing your first home or searching for a new property as an investment, there are many programs available through the U.S. Housing and Urban Development (HUD) department that you may be eligible to utilize. Fannie Mae loans are designed to ensure home ownership is achievable for all eligible citizens. You may qualify for a home loan product provided by this entity or you may be interested in a home currently under this entity’s ownership.

Officially referred to as the Federal National Mortgage Association, or FNMA, these loan types and purchases can be helpful for single-family homebuyers and investors alike. Additionally, learning about an FHA loan and other homebuying options can be useful before you attempt to make your next purchase. To find out more about this entity and other loan types and programs, read through the following sections.

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What is an FHA loan?

Many potential homebuyers assume that an FHA loan is administered by the Federal Housing Administration. However, with FHA loans, the FHA simply insures the loan. As with other traditional loans, a financial institution actually administers and holds the loan. Therefore, a loan applicant must still meet specific guidelines before obtaining this type of loan. However, since it is insured with the FHA, these financial institutions can usually offer benefits for potential home buyers who qualify, such as:

  • Low down payments.
  • Less closing costs.
  • Easier credit score qualifying guidelines.

There are also many other programs through the FHA that are related to these loans, such as down payment assistance or refinancing options. However, there are strict eligibility criteria you must meet to take advantage of these programs. These qualifications can relate to your age, the number of properties you have owned in the past and the type of home you plan to purchase.

Keep in mind, your credit report is usually an important factor in qualifying for a loan through the FHA. While the loan qualifications are usually less strict when compared to other traditional loan types, you will still be required to maintain a certain credit score to qualify for an FHA loan. An FHA lender who specializes in these types of loans can review your credit score and other factors to determine if you qualify.

What are Fannie Mae loans?

Fannie Mae was created by the U.S. government to ensure there is stability and affordability in the home ownership market for all eligible potential homebuyers. The entity purchases mortgages from lenders and holds them together in a pool or sells them. This transaction allows potential homebuyers or investors to gain access to properties through affordable financing terms.

Fannie Mae loans are not provided straight to consumers, so you cannot apply for a home loan through the entity directly. However, through several important programs, the entity ensures potential home buyers and multi-family home investors can find affordable properties and agreeable loan terms.

By incentivizing home loan providers to offer 30-year, fixed mortgages and other viable loan options to potential home buyers, Fannie Mae ensures that eligible potential buyers have access to stable and predictable monthly payments for their purchases or investments. Without this program, financial institutions may not be able to offer affordable loan options, making homeownership unattainable for many. Since it focuses on the stability of the market, this entity is an important factor in keeping homeownership affordable throughout the country.

Learn About Your Credit Report and Other Homebuying Programs and Options

If you are looking into your first home purchase, you may be wondering “What is rent to own and is a good option for me?” There are many rent-to-own opportunities for specific properties that you may be interested in. This may be a useful option for your first purchase if you do not the ability to provide a substantial down payment or if you have a low credit score. This loan option allows you to work on building up your credit score or saving up for your down payment while living in your new home and contributing money toward the purchase price.

Looking into an energy assistance program can also be helpful if you feel you will need assistance making improvements to your potential home purchase. The FHA offers an Energy Efficient Mortgage program (EEM) that can allow you to finance energy-efficient home improvements right into your home loan. If you are planning to purchase an older home that may need work, such as upgraded windows or a new air conditioning system, this loan may be right for you. By making these improvements right away, you can save money on your monthly energy bills, making it easier to afford your mortgage.

Finding good homeowners insurance that covers your home adequately is also important when you close on your new purchase. Homes that have newer features, such as a new roof, may attain more affordable insurance rates. Keep in mind, with an FHA loan, there are specific insurance coverages you must have on your policy to qualify with your lender.

Your credit report and other eligibility factors directly relate to the homebuying programs and other home purchase options you may be qualified to receive. It is important to review the programs offered through Fannie Mae and the FHA when purchasing your home, whether you are a first-time homebuyer or an investor. By taking advantage of these programs, you may find you are able to stop renting and buy a home, or you may be eligible to purchase a home with a higher price point than you originally imagined.