Mortgage Finance
Anybody who applies for a home mortgage needs to get it financed by one institution or another. This means that the companies that provide mortgage financing are simply loaning property buyers the amount they need to buy their chosen home in return for full repayment and a set amount of interest. There are numerous mortgage finance companies in the US, some of which back billions of dollars worth of mortgages each year.
Freddie Mac and Fannie Mae
These two home mortgage finance companies are responsible for around half of the home mortgages currently running in America. This equates to approximately $5 trillion worth between the two. The mortgages that these giants underwrite are sold mainly by independent mortgage brokers and so Freddie Mac and Fannie Mae never directly deal with the the property buyer.
In 2008, Freddie Mac and Fannie Mae were saved from the devastating consequences of the economic climate by the Federal Government and so are still the main mortgage lenders in the US today.
Banks
The majority of the US mortgage finances that aren’t down to Freddie Mac and Fannie Mae are approved by the various US banks. Banks of course have a limited supply of money to lend and so the qualifying criteria for a bank approved home mortgage can often be much more complex. Banks tend to object to overly large mortgage applications as well, jumbo and super jumbo mortgages for example, simply because of the risk that is involved with regards to payment defaults.
Independent Mortgage Lenders
There are a few independent mortgage lenders who have the means to approve small home mortgages should the need arise. This type of company often specializes in mortgage refinance packages for those people who are in trouble financially and are close to defaulting on their payments. Because of the risk involved with this type of scenario, the mortgage finance rate on such loans can be relatively high. That said, the mortgage lender will often extend the terms of the loan, so that the borrower pays a reduced amount each month and they profit from the interest payments in the long term.
There are various ways to secure mortgage financing today, each of which has its own particular benefits. Banks are often the first choice for most property buyers in the current economic climate, however Freddie Mac and Fannie Mae are still worth considering through the services of a mortgage broker.