Adjustable Rate
ARMs Offer Lower Rates
Staying in the same home for 30 years may not be your plan -- which is one reason to consider an adjustable-rate mortgage (ARM). An ARM generally offers a lower initial interest rate than a fixed-rate mortgage. With lower monthly payments in the initial years of your mortgage, you may qualify for a larger mortgage amount if you choose.
If the following is your situation, an Adjustable Rate Mortgage might be for you:
You plan to stay in your home for a relatively short period of time You want lower initial monthly payments and can handle potential payment increases in the future You want to qualify for a larger mortgage amount, and you expect your income to go up over time.
Main Features:
You can select an ARM with a fixed-rate period of up to 10 years. The interest rate and your monthly payment stay the same during the fixed-rate period.
After that, the interest rate adjusts (usually annually) based on a specific financial index -- for example, one frequently used index is tied to the price of U.S. Treasury bills or securities.
In addition to the index, an additional percentage, known as a "margin" may be added to the index value to determine your interest rate at the time of adjustment.
The rate moves up or down, depending on how interest rates have moved since you took out your loan. This means that when interest rates go up, your monthly mortgage payments may go up as well. On the other hand, when interest rates go down, your monthly mortgage payments may also go down. ARMs typically have an interest rate cap (or maximum) on the periodic adjustments and for the life of the loan, so you know that your monthly payment cannot ever increase above a certain amount.
Balloon Mortgage
The Fannie Mae seven-year balloon mortgage is a fixed-rate mortgage with a term of seven years. The principal and interest are amortized over a longer period (30 years) than the actual term of the mortgage. At the end of the balloon period, you may pay off the outstanding balance with a lump-sum payment or exercise the option to refinance for the remaining term.
The option to refinance is conditional, meaning you have to meet certain conditions (such as a history of timely payments or no second liens on your property). Conditions may include payment of closing costs and a lender fee, as well as no 30-day late payments in the previous 12 months and no other liens on your property.) You must occupy your property at the time of refinancing. You need not re-qualify for this loan when refinancing at the end of seven years as long as the new interest rate is not more than five percent above the current interest rate. The refinance condition is not automatic -- you must exercise the option.
Key Features
This mortgage is ideal if you plan to sell or refinance your home within seven years and want a low monthly payment during that time.
The interest rate you pay on a balloon mortgage is usually lower than a comparable 30-year fixed-rate mortgage.
The refinance option provides a "safety net" in case a planned relocation doesn't take place or economic conditions prevent you from
moving to a larger home
Fixed Rate
15 Year
You pay off a 15-year fixed-rate mortgage in half the time it would take you to pay off the traditional 30-year fixed-rate mortgage. This shorter term makes it possible for you to build up equity in your home faster, which can let you move up more quickly to a more expensive home or save more in preparation for retirement or a child's education. This loan is particularly attractive if you're refinancing your mortgage because you can shorten your loan term plus enjoy a lower interest rate. Fifteen-year mortgages are usually offered at interest rates lower than those available with 30-year mortgages. However, higher monthly payments may make it more difficult to qualify for the 15-year fixed-rate mortgage compared to the 30-year fixed-rate mortgage.
20 Year
With a 20-year fixed-rate mortgage, you can build up equity in your home more quickly than with a traditional 30-year mortgage and save interest over the life of your loan. As with all fixed-rate mortgages, the interest on your loan never changes, bringing you peace of mind that your principal and interest payments will remain level over time. However, higher monthly mortgage payments may make the 20-year fixed-rate mortgage more difficult to qualify for compared to the 30-year fixed-rate mortgage.
30 Year
The most popular type of mortgage, the 30-year fixed-rate loan is most appealing to borrowers who want to stay in their homes for a long period of time and who want to enjoy consistent interest payments during this period. Other benefits include keeping housing expenses to a minimum while maximizing mortgage interest deductions for income tax purposes.
40 Year
By increasing the standard loan term from 30 to 40 years, monthly payments are lower, thus making them more affordable, and increasing borrowers' purchasing power. The 40-year Mortgage is ideal for borrowers who face affordability issues and think homeownership is beyond their reach. First-time homebuyers, or those living in high-cost areas seeking manageable monthly payments may find this amortization term attractive. The 40-year Mortgage is eligible on both standard fixed-rate products as well as our standard 3/1, 5/1, 7/1 and 10/1 hybrid ARMs.
Biweekly Mortgage
A mortgage with affordable payments and faster reduction of principal
Let the calendar work for you! With a Biweekly Mortgage, you make a mortgage payment every 14 days, instead of once a month. The result? By making smaller payments more frequently, you will pay off your mortgage sooner and save thousands of dollars in interest over the life of the mortgage. A Biweekly Mortgage gives you the stability of a fixed-rate mortgage and the convenience of having payments automatically deducted from your checking, savings, or other deposit account.
Expanded Approval® with Timely Payment Rewards® (EA/TPR®) -- Fixed Rate
An Option for Borrowers with Less-than-Perfect Credit
If you are concerned about past credit problems keeping you from getting approved for a mortgage and being able to buy a home, Expanded Approval® may be for you. With Expanded Approval, lenders can take a broad view of your overall financial situation, not just focus on past credit problems. This way, Expanded Approval helps borrowers with less-than-perfect credit buy a home at a competitive interest rate. In addition, if your lender offers the Timely Payment Rewards® feature, you actually can reduce your interest rate if you make your mortgage payments on time for 24 consecutive months. Many Americans have been able to get into homes with Expanded Approval--so can you!
Interest-Only Mortgage
An "interest-only" mortgage allows you to pay only the interest on the money you borrowed for the first few years of the mortgage. This is known as the "interest-only period" (for example, the first five years of the loan). If you only pay the amount of interest that's due, once the interest-only period ends: You will still owe the original amount you borrowed, and your monthly payment will increase - even if interest rates stay the same - because you must pay back the principal as well as interest. Ask your lender what the payments on your loan will be after the end of the interest-only period.
MyCommunityMortgageTM
MyCommunityMortgageTM is a flexible mortgage product for low- and moderate-income borrowers.
Key Features
No minimum borrower contribution.
Up to a 40-year term.
Options for lower initial monthly payments with a 5-year or 10-year interest-only period.
Funds for down payment and closing costs can come from a wide range of sources, such as a gift from a family member; a gift, grant or loan from a nonprofit organization, municipality or employer; or the borrower's own funds.
Loan-to-value ratios permitted up to 100 percent for 1-unit properties.
Extra flexibility on credit histories, including consideration of nontraditional credit histories.
Extra flexibility on income sources including consideration of boarder income even if boarders are not related to the borrower.
Cash reserves at closing not required in most cases.
Part-time and overtime income is considered.
Purchase a single-family home (including a condo or co-op), a two-, three-, or four-family home to live in one unit and rent out the others (minimum 3 percent borrower contribution for two- to four-unit properties).
The following options for MyCommunityMortgage may provide additional flexibilities for qualified borrowers:
Community SolutionsTM for teachers, police, firefighters, and healthcare workers.
Community HomeChoiceTM for borrowers with a disability or a family member with a disability.
To learn more, contact us at 1-800-7FANNIE (1-800-732-6643) for information on participating lenders in your area.
Native American Housing Loans
The Native American Conventional Lending Initiative (NACLI) supports lending on fee-simple, federally restricted trust lands, and tribally restricted fee simple lands. We work with conventional (or non-government-backed loans) as well as government-backed loan products of the U.S. Department of Housing and Urban Development (HUD) and the Rural Housing Service (RHS) to better serve the housing needs of Native Americans. Fannie Mae also works with PMI Mortgage Insurance Company to offer a NACLI 1 percent down payment mortgage on fee-simple and federally restricted trust lands.
Key NACLI Features:
Any Native American, Indian Housing Authority, Tribally Designated Housing Entity is eligible.
Loans are available for one- to four-family principal residences, including condominiums.
Borrowers can build a home and get permanent financing with one mortgage and one loan closing through HUD's Section 184 and Section 248 housing programs and the HomeStyle® products.
Borrowers can buy a home with no money down through the RHS Section 502 Rural Housing Native American Pilot (RHNAP).
Fixed-rate mortgages with terms of 10, 15, 20, or 30 years are available, including a wide array of low down payment loans.
MyCommunityMortgage™ loans can be made for properties on tribal trust and restricted lands by a lender that has NACLI Terms and Conditions, and there are no income limits.
Cost-based appraisals are allowed when sales comparables are unavailable.
To learn more about the NACLI loan, contact Fannie Mae at 1-800-7FANNIE (1-800-732-6643). For more information about the NACLI 1 percent borrower down payment loan, contact PMI Mortgage Insurance Company at 1-800-759-4764. For Section 184 loans, a tribe must be approved to participate by HUD's Office of Native American Programs -- call 1-303-675-1600 to determine if a tribe is approved. For Section 248 loans, a tribe must be approved to participate by HUD's Federal Housing Administration -- call (202) 755-7503 to determine if a tribe is approved.
Pledged-Asset Mortgage
This mortgage lets you borrow up to 100 percent of the sales price (or appraised value, if less) of a home when there is a pledge of a stable financial asset. Pledged-Asset mortgages are specially designed for borrowers who have sufficient income to make monthly payments toward a home, but who have not saved the necessary down payment. The built-in safety of the pledged asset lets the borrower finance a home with a minimum investment of 5 percent (in down payment or closing costs).
Key Features
Pledged-Asset mortgages allow borrowers to capitalize on savings without spending them.
First mortgages with LTVs up to 100 percent are acceptable (so long as a 5 percent borrower contribution is made to closing costs).
Terms can be for 10-, 15-, 20-, and 30-year fixed-rate, fully amortizing mortgages. (Adjustable-rate mortgages are available only when the pledged asset is at least 10 percent and the borrower is making a contribution of at least 5 percent.)
Only one-unit, owner-occupied, primary residences are eligible.
The pledge may only be given by a parent, grandparent, brother, or sister eligible under the Fannie Mae gift policy or, in the case of the self-pledge, by the borrower. The pledge must be held as a certificate of deposit at a bank, credit union, or other depository.
Rural Housing Loans
Borrowers in rural areas now have easier access to affordable housing.
The MyCommunityMortgage™ mortgage option includes additional flexibilities for rural communities:
Income limits are now higher in rural areas, making it easier for more rural families to afford homes.
New rural appraisal guidelines that make it easier for lenders to lend in rural areas.
Fannie Mae also partners with the Rural Housing Service on its Section 502 Guaranteed Rural Housing Loan and its Rural Direct Leveraging Loan. The loans are backed by the Rural Housing Service, a division of the U.S. Department of Agriculture. They require no down payment for low- and moderate-income buyers.
Key Features
Below market interest rates may be offered on the Rural Direct Leveraging Loan.
There are no cash reserves required in your savings account when you go to closing.
You need less cash up front than you would for FHA loans.
The borrower's income is limited to 115 percent of the area median income for the guaranteed loan and 80 percent of the adjusted median income for the Direct Leveraging Loan.
Single-family, non-farm, owner-occupied principal residences, including new manufactured housing units, are eligible.
Eligibility is limited to rural areas, which generally have a population of no more than 10,000. In areas outside metropolitan counties, the town population limit (where the property is located) may be as high as 20,000.
To learn more, contact the nearest RHS office for information on qualified areas within your state and names of participating lenders. The RHS Web site may also provide additional information.
Simultaneous Seconds Mortgage
Simultaneous Seconds is originated and closed in conjunction with your first mortgage, which brings you the benefits of just one loan processing and closing. Your monthly payment will be lower than it would be with a single, larger first mortgage because there is no private mortgage insurance required.
Key Features
High loan-to-value ratios for both purchase and refinances are available.
No borrower-paid mortgage insurance is required.
There is no minimum loan amount.
Second mortgage terms available include 15-year or a 30-year-due-in-15 balloon.
No separate escrow deposit is required for the second mortgage.
Home Construction & Renovation
HomeStyle® Construction-to-Permanent Mortgage
One Mortgage Takes You Through Building and Living in Your New Home
Americans are building new homes at record levels. With a HomeStyle® Construction-to-Permanent (C-to-P) Mortgage, you can be one of them. You can finance the purchase of land, construction of a new home, and a permanent mortgage at one time. This saves you money and time by having just one loan approval and one loan closing. It also gives you the peace of mind to know that you already have a permanent mortgage in place before your new home is finished. You can even lock in an interest rate before construction begins. Compare this to the added costs and aggravation of having to get separate loans for the land acquisition, the construction costs, and the permanent mortgage.
Key Features:
A HomeStyle Construction-to-Permanent Mortgage is available for a home that you will live in as your primary residence, as well as certain other properties. You can borrow money to build a home from the ground up, or to finish building a home that is currently under construction.
You can select from a fixed-rate mortgage with a term of 15 or 30 years, or a 30-year adjustable rate mortgage (ARM) that has annual rate adjustments after the 3rd, 5th, or 7th year. You have one set of closing costs and can lock in the interest rates on the construction phase and the permanent mortgage at the same time.
This mortgage can also cover the cost of buying the land on which your house will be built. The construction phase can be financed for 6, 9, or 12 months and extended for up to 6 more months for an additional fee. During construction, you pay only the interest on the funds you actually receive. This means lower monthly payments as your home is being built. Or with the interest reserve option, you can delay paying interest while you continue to pay the mortgage on your existing home.
You can borrow up to 95% of the land acquisition plus construction cost of the home, which means your down payment may be as low as 5% of the amount of the mortgage.
HomeStyle® Renovation Mortgage
A Cost-Effective Way to Renovate Your Home
Are you looking to purchase a home that needs renovation? Or, do you need to fund renovations on your current home? A HomeStyle® Renovation Mortgage can help meet your needs. The HomeStyle Renovation Mortgage is a cost-effective and convenient way to combine home purchase or refinance with the cost of renovating or repairing your home in one loan with one closing. What's the benefit? Instead of financing the renovation with a second mortgage or home equity loan, you get the lower interest rates of a first mortgage and only have to pay for one mortgage closing. And with a HomeStyle Renovation Mortgage, you can borrow an amount based on the value of the home after the renovations are finished, so you know you will have the funds available to do the job right.
Key Features:
You can select from a fixed-rate mortgage with a term of 15 to 30 years, or a 30-year adjustable rate mortgage (ARM) that has annual rate adjustments after the 3rd, 5th, 7th, or 10th year. Whichever term you choose, you have just one set of closing costs and can lock in the interest rates on the renovation and the permanent mortgage at the same time.
The borrowed money can cover any renovations you want or need, as long as they are permanently part of the property and add value to it. Other costs related to a renovation are also covered. For example, you can even finance the rent on another home or apartment to live in while the renovations take place!
For home purchases, the loan amount can be based on the costs of the renovation project or on the "as-completed" value of the home after the renovations are finished. That means you can borrow more than the home's current value, knowing its value will increase after the improvements are finished.
Expanded Approval® with Timely Payment Rewards® (EA/TPR®)
An Option for Borrowers with Less-than-Perfect Credit
If you are concerned about past credit problems keeping you from getting approved for a mortgage and being able to buy a home, Expanded Approval® may be for you. With Expanded Approval, lenders can take a broad view of your overall financial situation, not just focus on past credit problems. This way, Expanded Approval helps borrowers with less-than-perfect credit buy a home at a competitive interest rate. In addition, if your lender offers the Timely Payment Rewards® feature, you actually can reduce your interest rate if you make your mortgage payments on time for 24 consecutive months. Many Americans have been able to get into homes with Expanded Approval--so can you!
Key features:
With Expanded Approval, you can select a fixed-rate mortgage with a term of 15, 20, or 30 years, or a 30-year adjustable rate mortgage (ARM). With an ARM, the interest rate stays the same for a period of 5 or 7 years (you choose); after that, the interest rate is adjusted each year. (The Timely Payment Rewards feature is offered only on fixed-rate mortgages.)
You can borrow up to the full amount of the purchase price of the home, and only need to contribute either $500 from your own funds, or 3 percent of your home's purchase price (from flexible sources such as gifts, grants, loans from relatives, or employer-assisted housing). This money will go toward closing costs, and/or the down payment if there is one.)
Flexible 100TM
Mortgages with little or no down payment
Are you concerned about not having enough money for a down payment? Or, would you like to set aside some of the money you have saved for move-in expenses? If so, a Flexible 100TM or Flexible 97® mortgage might be what it takes to get you into your own home. With a Flexible 100 mortgage, you don't need to make a down payment and can provide as little as $500 of your own money toward closing costs. With a Flexible 97 mortgage, you can pay just 3 percent of your home's purchase price toward your down payment, and this amount can come from sources such as gifts, grants, loans from relatives or nonprofit groups; or employer-assisted housing.
Key Features
You can select from a fixed-rate mortgage with a term of 15, 30, or 40 years, or a 30-year adjustable rate mortgage (ARM). With an ARM, the rate stays fixed for the first 5, 7, or 10 years (you decide), and after that, the interest rate changes annually after the 5th, 7th, or 10th year.
Flexible 100 and Flexible 97 mortgages use Fannie Mae's automated underwriting system to evaluate your application. This means faster service and loan decisions for borrowers with all different types of credit profiles.
Flexible 100 and Flexible 97 mortgages are available from many lenders throughout the United States, and are not restricted based on how much money you earn.
Flexible 97®
Mortgages with little or no down payment
Are you concerned about not having enough money for a down payment? Or, would you like to set aside some of the money you have saved for move-in expenses? If so, a Flexible 100TM or Flexible 97® mortgage might be what it takes to get you into your own home. With a Flexible 100 mortgage, you don't need to make a down payment and can provide as little as $500 of your own money toward closing costs. With a Flexible 97 mortgage, you can pay just 3 percent of your home's purchase price toward your down payment, and this amount can come from sources such as gifts, grants, loans from relatives or nonprofit groups; or employer-assisted housing.
Key Features
You can select from a fixed-rate mortgage with a term of 15, 30, or 40 years, or a 30-year adjustable rate mortgage (ARM). With an ARM, the rate stays fixed for the first 5, 7, or 10 years (you decide), and after that, the interest rate changes annually after the 5th, 7th, or 10th year.
Flexible 100 and Flexible 97 mortgages use Fannie Mae's automated underwriting system to evaluate your application. This means faster service and loan decisions for borrowers with all different types of credit profiles.
Flexible 100 and Flexible 97 mortgages are available from many lenders throughout the United States, and are not restricted based on how much money you earn.
Special Financing
Native American Loans
The Native American Conventional Lending Initiative (NACLI) supports lending on fee-simple, federally restricted trust lands, and tribally restricted fee simple lands. We work with conventional (or non-government-backed loans) as well as government-backed loan products of the U.S. Department of Housing and Urban Development (HUD) and the Rural Housing Service (RHS) to better serve the housing needs of Native Americans. Fannie Mae also works with PMI Mortgage Insurance Company to offer a NACLI 1 percent down payment mortgage on fee-simple and federally restricted trust lands.
Key NACLI Features:
Any Native American, Indian Housing Authority, Tribally Designated Housing Entity is eligible.
Loans are available for one- to four-family principal residences, including condominiums.
Borrowers can build a home and get permanent financing with one mortgage and one loan closing through HUD's Section 184 and Section 248 housing programs and the HomeStyle® products.
Borrowers can buy a home with no money down through the RHS Section 502 Rural Housing Native American Pilot (RHNAP).
Fixed-rate mortgages with terms of 10, 15, 20, or 30 years are available, including a wide array of low down payment loans.
MyCommunityMortgage™ loans can be made for properties on tribal trust and restricted lands by a lender that has NACLI Terms and Conditions, and there are no income limits.
Cost-based appraisals are allowed when sales comparables are unavailable.
To learn more about the NACLI loan, contact Fannie Mae at 1-800-7FANNIE (1-800-732-6643). For more information about the NACLI 1 percent borrower down payment loan, contact PMI Mortgage Insurance Company at 1-800-759-4764. For Section 184 loans, a tribe must be approved to participate by HUD's Office of Native American Programs -- call 1-303-675-1600 to determine if a tribe is approved. For Section 248 loans, a tribe must be approved to participate by HUD's Federal Housing Administration -- call (202) 755-7503 to determine if a tribe is approved.
Rural Housing Loans
Borrowers in rural areas now have easier access to affordable housing.
The MyCommunityMortgage™ mortgage option includes additional flexibilities for rural communities:
Income limits are now higher in rural areas, making it easier for more rural families to afford homes.
New rural appraisal guidelines that make it easier for lenders to lend in rural areas.
Fannie Mae also partners with the Rural Housing Service on its Section 502 Guaranteed Rural Housing Loan and its Rural Direct Leveraging Loan. The loans are backed by the Rural Housing Service, a division of the U.S. Department of Agriculture. They require no down payment for low- and moderate-income buyers.
Key Features
Below market interest rates may be offered on the Rural Direct Leveraging Loan.
There are no cash reserves required in your savings account when you go to closing.
You need less cash up front than you would for FHA loans.
The borrower's income is limited to 115 percent of the area median income for the guaranteed loan and 80 percent of the adjusted median income for the Direct Leveraging Loan.
Single-family, non-farm, owner-occupied principal residences, including new manufactured housing units, are eligible.
Eligibility is limited to rural areas, which generally have a population of no more than 10,000. In areas outside metropolitan counties, the town population limit (where the property is located) may be as high as 20,000.
To learn more, contact the nearest RHS office for information on qualified areas within your state and names of participating lenders. The RHS Web site may also provide additional information.
For Reverse Mortgages for Seniors go here
Refinancing
Refinancing is essentially paying off your existing mortgage and taking out a new one. This section discusses the basics of refinancing, such as the reasons for refinancing and the steps involved. It also discusses your financing options. After you understand these basics, a Fannie Mae lender partner can discuss the details further and help you get the refinancing process started.
Some of the reasons to refinance
obtain a lower interest rate,
build equity faster,
change loan type,
take advantage of an improved credit rating, or
draw on equity already built in the home.
Home Improvement
First, decide the specific home improvements you want to make. There are many different types of home improvement projects -- some require substantial time and costs while others can be completed quickly, at moderate cost, and with minimal disruption to your household.
Take into account how much value the changes may add to your home and the amount of time the work will take. You will then need to balance your wish list of home improvements with what you can afford.
Most home improvement projects fall into three general categories:
major renovations, which include adding or upgrading bathrooms, kitchens or other additions; installing new decks or patios; finishing basements or attics; or making handicapped access additions or modifications;
repair work, which includes energy-efficiency improvements, termite damage repair, roof repairs, and other health and safety repairs; and
cosmetic changes, which consist of interior and exterior painting, carpeting, molding, or floor refinishing.
Minor repairs and most cosmetic changes may not require a home improvement loan, though you should evaluate the costs before ruling out this option. Or, you may need financing for other repairs and major renovations. If this is the case, check with a Fannie Mae lender partner to further review your financing options.
One way to determine whether your house needs repairs is to perform an annual maintenance check of key areas. Some homeowners do this in the early spring or fall. Among the items to check -- either personally or with the help of a professional
mechanical systems (heating, air conditioning, plumbing),
major structural elements (roofing, gutters, downspouts),
exterior siding,
cement (sidewalks, steps),
wood or other materials,
the flashing around doors, windows, chimney, and roof,
doors and windows to ensure they are properly caulked, and
doors and stairs to ensure they are secure.
By spending a few hours once or twice a year, you can identify minor problems before they turn into major repair projects. Minor repairs are generally easier and less expensive to fix.
Source: For Home Buyers & Homeowners - www.fanniemae.com
