| Complete Our Secure Online Form
|
|
|
| You Receive Up To Four Offers
|
 
|
Fannie Mae Opens The Door To 40-Year Mortgages
What Was Once Considered To Be The Forgotten Stepchild Of Mortgages
Has Finally Become A Productive Member Of The Family
By The Mortgage Guy / MortgageLoanRequest.com
Why would anyone want a 40-year mortgage
is what you may be asking yourself. However surprising as it may seem,
mortgage giant Fannie
Mae has decided to go full steam ahead with their newest program after
a year and a half of fits and starts.
For the previous six and a half decades, the Federal National Mortgage
Association has chosen not to deal in longer term mortgages due to their
extended maturity legnth. However, they have reversed their position and
have decided that now is the right time to greatly extend amortization
plans. Qualified lenders from coast to coast are now in a position to
sell Fannie Mae as many of these extended term loans as possible. This
is the first time since the formation of Fannie Mae in 1938, and its becoming
a GSE (Government Sponsored Entity) in 1968, that this has been offered
to nearly all lending institutions wishing to participate.
In keeping with the slogan "Our Business is the American Dream," Fannie
Mae has set out to assist low, moderate, and middle income families during
this period of soaring property valuations. Hoping to add to the list
of 63 million people that they have already helped acquire homes, Fannie
Mae is now willing to keep these mortgages on the books until they go
full term. Previously, this was the single most important hurdle that
they needed to overcome inorder to be able to offer these plans to a full
family of investors.
Although it is something that will obviously not be for everyone, 40-year
terms will allow many the chance to own what they perviously could never
afford. By lengthening the amortization schedule, this program will cause
monthly payments to decrease, thereby making it easier to qualify. By
allowing these terms to be applied to fixed rate mortgages, as well as
the many forms of hybrid and adjustable rate home loans, those who cannot
afford the monthly payments of a 30 year loan, may now able to do so through
a 40 year term. In addition, these same prospective investors will see
an increase in their purchasing power.
In contrast, the lower payment of a 40 year mortgage may not be all that
attractive, since the interest
rate is at least and 1/8 to a 1/4 point higher then the standard thirty-year
terms, and the loan length is greater. Also, your budget for amortization
cannot go above twenty-eight percent of your monthly income and your combined
debt service responsibility may not supersede thirty-six percent. However,
if rates remain tolerable and people are able to get their foot in the
door, they can always refinance
at a later time to a loan with a shorter term and lower rate. All of this
may seem like an unnecessary and drawn out affair, but for someone who
has looked at a 30-year amortization plan and found themselves standing
on the porch looking in through a window, this option may be what opens
the door to the reality of ownership.
Forty year loans may eventually gain wide acceptance in the property
market, because there are many who are adverse to risk and not willing
to tolerate the uncertainty of an interest-only mortgage. No one would
have ever thought that property values could have soared in the last year
to today's current levels, and no one would have ever believed that interest
rates would have gone as low as they have. Consequently, there is no real
way of knowing how broad an acceptance these newly allowed 40 year terms
will have. But there is always room for one more option, and there is
always someone who will avail themselves of an opportunity when no other
exists. The only way anyone can know if a 40-year mortgage is the right
investment vehicle for them is to explore
the possibilities.
|
