Fannie Mae Information and Tips
When looking for a home, you might wonder why so many people
keep talking about this Fannie Mae thing.
After all, the only Fannie May you have ever
heard of involved a tasty piece of chocolate,
but when it comes to your mortgage,
this Fannie Mae may be a little more to swallow.
So how does a company that is so involved in
home mortgages come up with this funny name?
Well, Fannie Mae actually began back in 1968
and went by the name Federal National Mortgage
Association, or FNMA.
This government sponsored entity purchases
conventional mortgages in the secondary mortgage
market. This means that Fannie Mae tries to
make sure that there is money available to
those who want it to purchase a home.
All Incomes
The company prides itself on being able to offer financial
products to families of all incomes. Since it began, over 63
million families have owned homes that were financed through
Fannie Mae. So, if Fannie Mae sells mortgages on the secondary
market, how does that work?
First of all, it means that you cannot go directly through
Fannie Mae for your mortgage. It is actually your bank
that sells the rights to Fannie Mae. For instance, if you obtain
a mortgage loan through Local Bank, it only has a certain amount
of money to lend for mortgage loans. In order to bring in more
cash to the bank for your loan, they sell the rights to your
loan to Fannie Mae. As you pay Local Bank every month for your
mortgage, the funds go on to Fannie Mae.
So why do banks use Fannie Mae?
Well since Fannie Mae is a quasi-governmental agency, it can
borrow money at a lower interest rate than other financial
institutions can. This way when local bank needs funds, they can
avoid tying up capital in a single loan and so make several
loans from the same capital base. Fannie Mae believes this
improves the willingness of banks to lend money in good times
and bad.
One other aspect of Fannie Mae is that the company is always
focused on doing what they can to help people with home
ownership, so the company created the Fannie Mae Foundation. For
over 20 years, the Fannie Mae Foundation has created
opportunities for affordable home ownership, and it is working
on building livable neighborhoods. According to the Fannie Mae
Foundation, their “central commitment is to Americans who
urgently need safe, decent homes in safe, decent communities.”
When searching for a new home and a mortgage to go with it,
Fannie Mae is going to be a term you hear often. Understanding
that Fannie Mae often helps banks set loan terms and guidelines
along with how Fannie Mae works with banks to fund your mortgage
can help you understand what the company has to do with your
mortgage loan..
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