How to Apply for a Fannie Mae Home Loan

If you are seeking a Fannie Mae home loan, you want to ensure you complete the process properly. Navigating the world of mortgages and government-sponsored enterprises is complicated, but the benefits can be numerous. Fannie Mae-backed loans typically have lower interest rates than loans that are not backed by the company.

Although many major institutions can sell loans to Fannie Mae, not all institutions do so in the same way. Some do it indirectly, by selling it to a larger third party. Independent mortgage brokers can also help you get a backed loan, but they might charge additional fees. It is important to know the benefits and drawbacks of different lenders before selecting one. The sections below describe how to apply for a mortgage backed by Fannie Mae.

Our comprehensive guide can walk you through the exact steps required to apply for a Fannie Mae loan.

Figure Out What You Want to Buy

Before you start thinking about mortgage brokers, make sure you know what you want. Fannie Mae loans have requirements in place regarding what kind of mortgages are available. That includes a maximum price for home loans. In most counties, that maximum is $453,100. Before you begin the process of applying for a loan, you should know what house you are seeking to buy. Therefore, the first step is getting pre-approval.

Getting pre-approved lets you know what size loan you can get based on your current financial status. It can also significantly aid you in your search for a home, since sellers are reassured by your pre-approval. Additionally, you do not have to apply for a home loan from the same institution that gave you your pre-approval letter. Once you have a home in mind, you can begin the process of applying for a Fannie Mae mortgage.

Reach Out to Lenders for Options

Begin shopping around for Fannie Mae lenders in your area. You can find a list of approved lenders online. However, the list will not provide pricing or product information. To get information on your specific options, begin calling local lenders and ask for loan estimates. You can contact a mortgage broker or a direct seller, depending on who you trust more.

A mortgage broker might be able to waive some fees and has access to a greater variety of products. However, brokers may ultimately charge you more for the service, and depending on the broker, you may not get the best products around. A direct seller sells loans directly to Fannie Mae, which means the process can be completed faster. Additionally, it also means there is no chance of lender overlay, the which occurs when financial institutions add additional requirements to Fannie Mae’s guidelines. Ask for quotes from your lenders, including any included fees, and how long it will take to complete the mortgage process.

Consider a Rate Lock

Some Fannie Mae lenders will allow you to get a rate lock when you receive a loan estimate. This means they will guarantee that the mortgage interest rate in place at the time of your application is what you close with. In some cases, you can lose a rate lock, but generally as long as you close between 30 to 60 days after applying, you will keep it. This is beneficial if you suspect interest rates will rise after you apply for a home loan.

However, keep in mind that if rates appear to be trending downward, you may be locking yourself into a higher rate unnecessarily. This rate matters because it affects what your monthly mortgage payment will ultimately be. Getting the best deal possible is a priority, so do not lock in a rate if you suspect it will fall later on. You may have to pay a fee to lock in a particular rate. When you receive your loan estimate back, inquire with your lender about rate lock options and requirements.

Download our in-depth guide to learn more about locking down your rate.

Gather Your Financial Documents

When you apply for a Fannie Mae mortgage, you must provide numerous financial documents. These documents confirm your income history, debts and overall wealth. Lenders will use this information to calculate your debt-to-income ratio and the loan-to-value ratio of your proposed mortgage. The list of documents required can be lengthy, depending on your income and work history. In general, expect to provide the following when applying for a mortgage:

  • Your W-2 from the last two years.
  • Pay stubs from the past month.
  • Bank statements for all financial accounts from the past two months.
  • Tax returns from the last two years.
  • Your Purchase and Sale agreement for the home.
  • Photo identification.
  • Gift letters, if necessary.
  • Rental history, if necessary.

You might need to provide a gift letter if you receive help from family or friends to purchase the home. A gift letter explains that an amount of money put toward the purchase of your home was a gift, not a loan. Additionally, it should explain the relationship the gift giver has to you. Finally, you might need to provide rental history for a Fannie Mae loan. This is particularly true if you have never owned property before. Your rental history can demonstrate that you have a history of making payments for your living space on time.

Submit Your Application

After you submit your financial documents for a Fannie Mae home loan, your lender will evaluate your application. The underwriting process can take up to a week to complete, depending on your institution’s expediency. If there are complications in your financial background, it may take longer. If you are denied, you may have to start again. If you have been approved for a Fannie Mae home mortgage, evaluate the terms and conditions carefully. If they are not suitable, you have the option to turn down the loan at this stage. Do not accept a loan that has terms and conditions you do not think you can commit to. If you do like the terms, you can sign your mortgage loan documents. Be careful, however, since unlike with other loans, you do not have a “right of rescission” when you sign a mortgage contract the way you do while refinancing a loan. That means you do not have the right to back out within three days of signing. If you sign the contract, you have committed to the loan.

What is Fannie Mae?

The Federal National Mortgage Association (Fannie Mae) provides affordable housing finance options for homebuyers and renters. Fannie Mae does not provide original mortgages. Rather, the organization purchases existing mortgages and guarantees them with government sponsorship. Fannie Mae mortgages have a fixed rate and can have a lifespan as long as 30 years.

Who is eligible for Fannie Mae?

Fannie Mae guarantees multi-family and single-family mortgages and loans. To qualify for either type of loan, an applicant must have an income lower than the local average, and the property he or she wants to buy must be worth less than the federal maximum. Further, applicants must have a credit score above 620. However, the minimum required credit score may change depending on how many properties the applicant plans to purchase.