What types of housing does Fannie Mae offer loans for?

The Federal National Mortgage Association, also known as FNMA or Fannie Mae, is a government-sponsored enterprise (GSE) that was established by the United States Congress. Its primary goal is to expand and stabilize the housing market. The FNMA was created during the Great Depression when nearly one-quarter of all American homeowners lost their homes to foreclosures with banks. Along with its brother organization, the Federal Home Loan Mortgage Corporation, or Freddie Mac, this enterprise helps finance a huge portion of purchases in the housing market.

The GSE known as Fannie Mae operates within the secondary mortgage market. This means that it purchases existing loans from lending institutions instead of underwriting and originating loans itself. Fannie Mae purchases, groups and securitizes mortgages in all housing markets in a broad geographic area. Once these loans have been grouped into mortgage-backed securities, they will be made available for purchase by investors. The FNMA makes this purchase more appealing by ensuring that investors will be paid when a borrower makes principal or interest payments.

Fannie Mae is currently one of the largest sources of funding in the housing market. In fact, the FNMA expanded its eligibility requirements to allow more individuals and families access to homeownership. Since the expansion, more than 100,000 new single-family loans were delivered. The FNMA purchases loans from both single-family and multi-family mortgages, but only single-family loans are available to individuals or families looking to become homeowners. Generally, multi-family mortgages are for business owners who are looking to provide dwellings such as apartments or senior housing. However, there are certain requirements for the single-family housing types that are eligible to be financed through Fannie Mae loans.

Note: To get details about the types of housing available through the FNMA, including affordable properties, download our comprehensive guide.

What types of housing does Fannie Mae offer loans for?

If you are looking to become a homeowner, you may be wondering what properties are considered valid for a Fannie Mae home loan. The first general rule of single-family mortgages is that the dwelling must consist of one to four housing units. Typically, dwellings with over five housing units are deemed multi-family housing, and those loans are restricted to large private businesses. Next, the location of the property must be appropriate. Fannie Mae only offers housing loans for properties located in:

  • The United States of America (including the District of Columbia).
  • Puerto Rico.
  • The U.S. Virgin Islands.
  • Guam (the mortgages on these properties must be specifically negotiated).

Housing Property Requirements

Fannie Mae homes may be properties that are detached, attached or semi-detached. These properties can be located on an individual lot, in a condo project, in a co-op project or in a planned unit development (PUD) or subdivision project. All properties that are located in a condo, co-op or PUD must meet FNMA project standards. To meet property requirements, the mortgaged premises must be:

  • Deemed a residential area. This can be defined by specific characteristics found on the property and in the surrounding market area.
  • Safe, sound and structurally secure. Fannie Mae prides itself on providing loans for affordable and high-quality properties.
  • Adequately insured, according to Fannie Mae’s insurance guidelines.
  • The highest and most optimized use of the property (or improvements to a property). Property usage must always remain legal, and any illegality can result in a breach of contract.
  • Readily accessible by roads that are up to local standards.
  • Have access to utilities and services that meet community needs.
  • Suitable for use all year.

Properties That Are Ineligible for Fannie Mae Housing Loans

There are some circumstances in which Fannie Mae will not purchase or place a property loan in a mortgage backed security (MBS). These types of properties are considered ineligible for Fannie Mae single-family mortgages. For example, loans for vacant land or land development properties are not qualified to be purchased on the secondary mortgage market. Properties that are located in isolated areas that are inaccessible by local roads are also illegible. Agricultural properties, such as farms or ranches are not authorized for a securitized mortgage, even if they are located on accessible roads.

Some other common examples of properties that Fannie Mae avoids includes:

  • On-frame modular constructions.
  • Units in condo or co-op hotels.
  • Properties that are not secured to real-estate, such as:
    • Houseboats
    • Timeshares
    • Boat slips
  • Boarding houses.
  • Bed and breakfast properties.
  • Properties that are not suited for occupancy all year.

For more information on ineligible properties, download our in-depth FNMA guide.

Fannie Mae’s HomePath First Look Program

Homebuyers who are looking to receive a Fannie Mae mortgage might be interested in their affordable HomePath First Look program. This program offers buyers an exclusive look at a unique type of property, those that have been newly listed for foreclosure. The First Look program is beneficial because it is directly managed by Fannie Mae. During what is called the “First Look” period, homebuyers can make an offer and even purchase a HomePath home without having to deal with competitive investors.

Note: Only properties that are owned by the FNMA will be listed on HomePath.

In order to promote homeownership and help to stabilize neighborhoods that have an abundance of foreclosures, the FNMA allows homebuyers to participate in the First Look program. If a homebuyer finds a property that is listed under this program, she or he can negotiate and complete the purchase before Fannie Mae opens up the property to investors. The only parties eligible to buy a property during the First Look period are owner-occupants, public entities and their partners, as well as certain eligible non-profit organizations.

Typically, properties that are a part of this program are listed on the HomePath website for a certain number of days. There will be a countdown clock on the property’s information page that will display the First Look days remaining before the property is opened up to other potential buyers. After this period expires, investors can submit their offers for consideration. Locating a house to purchase on HomePath may be the cheapest option, since the properties were recently foreclosed.

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.