Mortgage Loans

In the 1980s, interest rates in America achieved record highs of more than 18%. Those high interest rates made it much more difficult for potential home-owners to afford a mortgage. It was during this time that the concept of the 40-year mortgage was born. The increased length of the mortgage reduced monthly payments to a more manageable level and made it possible for more people to afford a home loan. When interest rates decreased this type of mortgage fell out of favor, and they were relatively rare until recently.

In 2005, Fannie Mae introduced a pilot program to test the feasibility of offering 40-year mortgages, and 40-year mortgages are once again increasing in popularity. In 2006, around 5% of new mortgages were 40-year fixed-rate mortgages. This type of mortgage has become particularly popular in high-cost housing markets such as on the West coast. They’re also becoming popular with first-time home-owners who have only a small amount of cash for a down-payment.

A home mortgage is a major investment, so careful consideration must be taken when researching your mortgage options. Your mortgage loan officer is there to help you out, so don't be afraid to ask them a couple of questions.

You should begin by asking your loan officer if they are offering any new residential mortgage loans. If they aren't, ask if they recommend any local lenders who are currently active in the loan process.

Next ask for the current rate of interest for conventional financing, which is a loan for 80% of the purchase price.

Ask your mortgage officer how much mortgage you can afford based on your debt-to-income ratio. Tell them you are requesting a general figure only and you are fully aware that people can only be qualified after review. The answer is usually formed from a formula similar to 1.6 X annual income, 2.0 X annual income or yearly mortgage payments equal to 25 or 28 percent of an individual’s gross income.

Real estate partnerships and other individuals have bought thousands of residential condominiums, townhouses, and single-family homes over the years. The majority of these loans were financed with what the industry calls investor loans. Investor loans are mortgages on a one-unit to four-unit residential property that will be rented by the owner to others. If the owner decides to live on the property in a unit, this is called owner-occupied property.

When you are applying for a Fannie Mae mortgage on an investment property you must qualify according to the same standards as a mortgage on your primary residence, and the property itself must qualify as a wise investment according to Fannie Mae’s guidelines for investment properties. The property’s projected rental income less projected operating expenses must be at least ninety percent of the monthly mortgage payment of principal, interest, and insurance.