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Underwriting guidelines for fannie mae and freddie mac

About Fannie Mae & Freddie Mac

Jumbo mortgage loans exceed the conforming loan limit in order to facilitate the purchase of a high priced luxury home, for a borrower. They also attract a higher rate of interest. This is due to the rising property values. To ensure that the borrower is a safe risk, their employment history, network, income, credit rating, loan-to -value ratio and debt-to-income ratio will all be requested and verified for accuracy. It is the duty of the lender to confirm the identity of the borrower prior to the extension of the credit. All approved lenders must submit Form , Form and Form annually to maintain eligibility as a Fannie Mae customer.

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Fannie mae facilitates lenders to provide higher mortgage loan amounts on a property that is a primary residence when compared to an investment property. Lenders are required to ensure that borrowers have a minimum credit score requirement that ranges from to with minimum loan to values of 75 percent To ensure that the borrower is a safe risk, their employment history, net work, income, credit rating, loan-to -value ratio and debt-to-income ratio will all be requested and verified for accuracy. Lenders are also responsible for meeting certain standards. The organization will be studied to determine that they are properly licensed and have enough experience in the industry to manage underwriting.

Since the lender is responsible for initiating, selling or servicing the loan, the organization must be able to demonstrate adequate internal management and auditing mechanisms to handle the volume of their mortgage underwriting business. Lenders must check that they are cooperating under the most recent guidelines, which are occasionally updated by Fannie Mae. Check www. Freddie Mac Guidelines More home buyers can get mortgages without having to pay higher interest rates on jumbo mortgage loans.

Multifamily Finance 202 with James Eng (Fannie Mae Loan- Advanced Topics)

Financing is available for all three types of properties, but the specifics of the guidelines change. For example, Fannie Mae guarantees a higher mortgage amount on a property that is a primary residence than an investment property , because a primary residence is less risky than an investment property. Finally, Fannie Mae also allows borrowers to refinance existing properties.

Borrowers have the option of doing a straight refinance, which is when they refinance the new mortgage for the same amount as the existing mortgage balance. Borrowers can also do a limited cash-out refinance, which is when the borrower refinances the existing mortgage balance, in addition to taking equity out of the property in the form of cash. Fannie Mae guidelines specifically state the maximum loan amount allowable.

While buyers can choose a home with a purchase price that exceeds the maximum loan amount, the borrower can only finance up to the maximum loan amount.

Fannie Mae Underwriting Guidelines

The maximum loan amount can vary according to the state and the county where the property is financed. In areas where property values are higher than other parts of the country, such as Alaska, Hawaii, and Guam, Fannie Mae sets higher loan limitations. The maximum loan amount can also vary according to the type of property and its use. For example, a duplex, where the borrower plans to occupy one unit as a primary residence and rent out the other unit, has higher loan limits than a standard primary residence or a standard investment property.

In areas where property values are higher than other parts of the country, such as Hawaii, Fannie Mae sets higher loan limitations. Another requirement of the guidelines is that the home being financed must be appraised. This is true whether the home is a purchase or a refinance.


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Fannie Mae does not allow loans that match percent of the purchase price or the market value of a home. Instead, Fannie Mae guarantees a mortgage amount as a percentage of the purchase price or the market value of the home, whichever of the figures is lower. The percentage of the purchase price or market value of the home that the borrower can finance is the loan-to-value.

The loan-to-value varies according to the type of property, the type of mortgage fixed or adjustable rate and whether the financing is for a purchase of a home or a refinance.