Fannie Freddie Change and FHA/VA Loans

The Paulson announced takeover of Government Sponsored Mortgage Giants Fannie Mae (FNMA) and Freddie Mac (FHLMC) created a welcome stability and confidence in both the mortgage market and the money markets as a whole.   The key need was for foreign governments and hedge funds to begin purchasing mortgages again – something that had all but stopped in recent weeks.

These entities are too large, effect too many individuals, and would create too much havoc if allowed to bankrupt for the US government to let them fail. I am not a personal fan of bigger government, but in this case, I’ll shout a big ole’ hoorah.  It is necessary for the stability of many levels of our economy.

Does the Fannie & Freddie bailout plan help or hurt FHA borrowers?  Aren’t FHA loans insured by HUD?   FHA Home Loans are insured by HUD, and are not directly associated with Fannie & Freddie. Ditto with VA.

However, many of these loans are sold through Fannie and Freddie into the marketplace… so knowing that this system will not be interrupted is important.

Also the market’s reaction to the bailout has reduced Interest Rates by nearly a half a percent across the board.  Again, this could be because of more interest in buying and holding mortgage loans.

Lower rates mean lower payments… so if you are a homebuyer you will be able to afford a little bigger home!  Yippee!!

If you have questions about purchasing a home in The Raleigh, Cary area please call Steve and Eleanor Thorne, First Financial Services, 919-649-5058

FHA Loans are still more competitive and have lower overall costs than Conventional or conforming loans when purchasing a home with very little down payment (10% or less)