first time home buyer – owner loan

Jennifer Stromsteen asked:


It is the opinion of many people that the government, despite what the President may say, will in fact bail out mortgage high players Fannie Mae and Freddie Mac. For these companies to fold would be detrimental to the economy. But what exactly are Fannie Mae and Freddie Mac and what do they do? Simply put, a home buyer achieves a mortgage from a lending institute and Fannie Mae or Freddie Mac purchase the mortgage to then resell it again to investors. They receive money from the sale to the first lender to continue lending.

In the last decade Freddie Mac handled nearly $164 billion in New York mortgages alone; serving over 1,325,000 families. If Freddie Mac and Fannie Mae have serious financial problems then credit will tighten and it will become increasingly difficult for any consumer to get a mortgage; but particularly for the first time home buyer. At this point it is speculated that these companies will not need to borrow money from federal reserves, the government or the treasury; however, the government has stated that if they do need it they can come for it. With the potential for government bailouts confidence is building.

When push comes to shove, impact from national news or news on a local level does not change the rules in applying for a first mortgage; make sure you have your finances in order before shopping for a home, make sure your credit is in line and be aware of your credit score. The first time home buyer needs to educate themselves more than ever as lenders begin to tighten their belts. Knowing what your credit score is, how to increase that score and look favorable to the lenders will increase your chances of obtaining a mortgage regardless of what is happening in the financial world; these are basic rules.

Before a lender will grant a loan for a home he will first run a credit report on the buyer to help them get a picture of the buyer’s ability to pay the loan. The last thing a lending institute wants is for a buyer to get in over their head and default on their mortgage. It is therefore recommended that before shopping for a home or showing up at the lending institute to apply for a first mortgage you run a credit report of your own. This will help you figure out any areas that need to be corrected and what areas could be improved. Once you are satisfied and your lender runs the report he will be able to help you understand what you can afford. If you have discovered your credit is in shambles or your credit score is low there are ways to bring up your credit score and you will have the time to do so.

Freddie Mac and Fannie Mae having financial problems is just the reflection of what is happening in the economy today; we are all feeling the pinch. This is a time, more than any to tighten our own belts, avoid using credit excessively and manage your credit well; doing these things will allow you to be among the few buyers that the lenders extend a first time mortgage to.



Jean