Order Now!

User Reviews

An Online Course

Sandy Gadow, a featured guest on CNN's "Open House," and a speaker on national radio as the escrow expert, has more than 25 years experience in escrow, title and real estate. A licensed mortgage broker and real estate sales associate, Sandy is a member of the American Land Title Association, the California Escrow Association, the National Association of Real Estate Editors and on the advisory council for the Escrow Career Center. She is the author of The Complete Guide to Your Real Estate Closing. If you have questions for Sandy see our Ask Sandy page.

What are Fannie Mae Guidelines?

You may have heard your lender or mortgage broker refer to "Fannie Mae Guidelines" when asking you for documentation supporting your loan application. They may have explained to you that you must qualify for the loan under those guidelines. Have you ever wondered what those rules were and why your loan had to comply with those regulations?

Fannie Mae is short for the Federal National Mortgage Association. Fannie Mae is the country's second largest corporation and was established by an act of Congress in 1938. Fannie Mae was created to bring stability back to the housing industry after the depression. In 1968, Congress rechartered Fannie Mae as a private company. Congress mandated that Fannie Mae operate with private capital, be self-sustaining, and enhance the flow of funds through the secondary market to homebuyers. It operates under a federal charter, which is called the Federal National Mortgage Association Charter Act. This act places certain rights and responsibilities on the company.

Fannie Mae does not directly loan money to you, the "primary" Borrower, but rather loans money in the "secondary market", or to lending institutions. In short, by lending money to your lender, this frees up capital for your bank so they can go on to make more loans.

In order for Fannie Mae to buy single family home loans from mortgage bankers, savings and loan associations, commercial banks, and other financial institutions, the loans must conform to their set of "Fannie Mae guidelines." They require certain "debt to income ratios" and specific supporting documentation on your employment, assets, and debts. Normally you will be required to verify two years employment. If you have a 25% or greater interest in a business, you would be considered self-employed. An accurate and reliable appraisal will be required. Fannie Mae requires that lenders use an appraiser who is licensed following their guidelines.

Fannie Mae only deals with mortgages made to individuals. A corporation or general partnership would not qualify for a Fannie Mae loan. Fannie Mae will allow a mortgage that has a co-borrower, and that person is not required to take title to the property. The income from the co-borrower will not be accepted for qualifying purposes, unless that person also signs on the promissory note.

Loans made for your principal residence, second home, or an investment property, all may qualify under a Fannie Mae loan program.

Fannie Mae sets loan limits with are linked to the Federal Housing Finance Board's October single-family price survey. These loan limits are adjusted each year in accordance with the results of this housing survey. For example, the current loan limit for a single family residence is $417,000. (except in Alaska, Hawaii, and U.S. Virgin Islands, which carry a 50% higher limit). Loans made within Fannie Mae loan limit guidelines are termed "Qualifying" or "Conforming" loans. They generally carry lower interest rate levels than "Non-Conforming" or "Jumbo Loans."

What are Fannie Mae Guidelines?

Related Question

Related Link