|
The United States government doesn't directly give mortgages,
but they have several agencies and programs associated with
the mortgage industry.
Federal Mortgage Agencies
Lenders generally earn their income from their fees, points,
and other loan charges. Therefore the more loans they give,
the more they earn. Selling their mortgages to the secondary
market permits them to get cash to make new loans.
There are two federally chartered corporations that purchase
the largest percentage of home mortgages: Freddie Mac and
Fannie Mae. These are nicknames for the Federal Home Loan
Mortgage Corporation and the Federal National Mortgage Association,
respectively. Lenders have to meet their requirements in order
to sell their loans.
Freddie Mac
Freddie Mac is an agency that purchases conventional first
mortgages as well as secondary mortgages guaranteed by the
FHA or VA from members of the Federal Reserve System and the
Federal Home Loan Bank System, and then sells them to investors
in order to create more funds for lenders to grant new loans.
The Federal Home Loan Mortgage Corporation was chartered by
Congress in 1970 so as to generate funds for lenders and thereby
encourage affordable homeownership; their policies are intended
to serve the needs of the lenders. Freddie Mac is under the
supervision of the U.S. Department of Housing and Urban Development
(HUD).
Fannie Mae
Like Freddie Mac, Fannie Mae is also chartered by Congress,
and is the biggest source of home mortgage finances. They
also purchase residential mortgages and then resell them to
generate cash for lenders to make new loans. They are a privately
owned corporation, but are under the supervision of the Federal
Housing and Urban Development Office (HUD).
Federally Supported Programs
The United States government insures and funds numerous mortgage
programs including VA, FHA and FmHA mortgages.
Department of Veterans Affairs
Department of Veterans Affairs (VA) mortgages are insured,
but not issued, by the United States government. They are
intended to help eligible veterans and their spouses purchase
homes.
To be eligible for a VA loan, you must have served on active
duty in the Army, Navy, Air Force, Marine Corps, or Coast
Guard and have been honorably discharged after either 90 days
or more, any part of which occurred during wartime, or 181
continuous days or more during peacetime.
To qualify for a VA loan, you must have a certificate of eligibility,
proving your military service; complete VA Form 26-1880 to
request this certificate. Unless the home is over certain
limits, no down payment is required.
Federal Housing Administration
Federal Housing Administration (FHA) mortgages are administered
by the Department of Housing and Urban Development (HUD).
The United States government insures but does not issue these
mortgages and they include easier credit qualification, down
payment, and underwriting standards than conventional loans.
Your payment for these mortgages cannot exceed 29% of your
gross monthly income and your total debt should not be more
than 41% of your gross income; you can get an FHA loan with
a down payment of 3%. This is in contrast to the 26-28% and
33-36% required to qualify for standard mortgages.
HUD collects mortgage insurance payments from borrowers and
promises to make full payment to the lenders if the borrower
defaults.
To qualify for an FHA loan you must have good credit and sufficient
income for the payment.
Federal Farmers Home Administration
Federal Farmers Home Administration (FmHA) mortgages are financed
and insured loans to farmers and other qualified borrowers
for rural housing and other purposes. They are funded by government
subsidies and the money is distributed every quarter to local
offices.
To qualify for FmHA the property needs to be one acre or less,
and there are low selling price limits that are determined
locally. The program is meant for low-income borrowers who
cannot qualify for other loans.
Applications are made to the local office, and when the applicants
are approved, they are informed when the funds are available.
Equal Credit Opportunity Act
In addition to these programs, the government has laws that
affect mortgage lenders. The most important of these is called
the Equal Credit Opportunity Act (ECOA). This Act guarantees
that everyone receives an equal opportunity to receive a loan.
Nevertheless, it does not specify that everyone who applies
will be approved. This is because they evaluate applications
based on income and debt standards.
According to the ECOA, a lender cannot reject your application
based on your sex, marital status, age, race, national origin,
or because you receive public assistance income, and other
than religion, they can only ask you to voluntarily provide
this information.
They cannot ask you if you are widowed or divorced or about
your plans to have children. They cannot request information
about your spouse unless they are applying with you, although
joint property states (Arizona, California, Idaho, Louisiana,
Nevada, New Mexico, Texas, and Washington) may ask about your
marital status.
There are also rules for what they can and cannot do when
evaluating your income, and deciding whether or not to grant
you credit.
|
