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
(PRWEB) June 24, 2005 -- 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 length. 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 in order 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 previously 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.
For more information on home
loans and mortgage calculators, visit www.mortgageloanrequest.com
# # #
Source : http://www.prweb.com/releases/2005/6/prweb254402.htm