Sources of Mortgage Loan Money , Part 2

Once Freddie Mac, Ginnie Mae, and Fannie Mae purchase loan pools, they break the packages down into smaller ownership parcels called "mortgage-backed securities” which are Bonds. Each security (or bond) represents a small ownership interest in the pool of loans, of which your loan is only one small part. Because the investment risk is diversified, mortgage-backed securities are a very safe financial investment.

Stocks and bonds, including mortgage-backed securities are sold on Wall Street to institutions or individuals who are looking for exactly this type of investment. By selling the bonds, Ginnie Mae, Freddie Mac, and Fannie Mae obtain new funds, with which to buy new pools of loans (so mortgage lenders can get more money to lend to their new borrowers).

So why not just bypass the "middle man" and get your home loan directly from one of the big three lending institutions? Because Fannie Mae, Freddie Mac, or Ginnie Mae are Quasi-Government agencies that were charted by the federal government and they are not allowed to deal directly with consumers.

Besides, many of today’s mortgage products offered by your local mortgage brokers are not provided by the Quasi-Agencies. Many mortgage programs and products are provided by wholesalers who do the same things the Quasi-Agencies do: they sell mortgage-backed securities on the bond market. Qualification standards are different: the wholesalers can sometimes provide financing when Fannie Mae, Freddie Mac, and Ginnie Mae will not.

What’s more, mortgage brokers know the areas of specialty of various wholesale lenders. They can hand-pick the product and wholesaler (from a pool of hundreds of them) that offers the best deal for your unique circumstances. (Also, if your loan gets declined for whatever reason, you're not necessary out of luck: they can simply repackage it and submit it to another wholesale lender.)

Sources of Mortgage Loan Money , Part I

Where does your mortgage money come from and why don't lenders run out of money? Over the next several days, we'll examine this topic.


Most of the money that is made available for home loans comes from three major lending institutions:

• Fannie Mae: Federal National Mortgage Association (FNMA)
• Freddie Mac: Federal Home Loan Mortgage Corporation (FHLMC), and
• Ginnie Mae Government National Mortgage Association (GNMA)
  

As a borrower, you apply for a home loan through a mortgage broker or banker. Once your mortgage professional completes all required processing and verifications, he decides whether you qualify for a loan. After you obtain financing for the purchase of a home, you begin making monthly mortgage payments.

Your mortgage loan may be packaged into a "pool" with several other loans and sold off to Fannie Mae, Freddie Mac, or Ginnie Mae. (Some mortgage companies don't sell directly to those major investors, but sell their loans to the wholesalers, who then in turn sell it to one of the big three institutions). Once this happens, it frees up more money in a portfolio. This gives the mortgage lender the necessary resources to make additional loans to other homebuyers.

Once your loan is sold off, your mortgage professional isn’t the loan owner anymore. Instead, he is the loan servicer. (This means that he receives a monthly fee from Fannie Mae, Freddie Mac, or Ginnie Mae for processing your mortgage payments.) Don’t be surprised if over time your home loan gets transferred from one mortgage servicer to another. They aren't selling your loan again, only the right to service it.

How bad will the 2007 housing market be?

Everyone's wondering it, and Business Week attempts to answer it an an insightful article.

The news magazine asked economists at leading real estate research firms to provide their outlooks for the housing market in 2007. They concluded that:

• interest rates will remain at historically low levels
• homebuyers will see more opportunities, and,
• best of all (for those planning for the long term), 2009 could be primed for a comeback

Get a Free Credit Report Every Year in New Hampshire

Increase your credit scores NOW by disputing any inaccurate credit information in your credit file and by requesting your old negative records be removed. You can do this now and get results nearly immediately. Here's how:

The FACT Act entitles New Hampshire consumers to one free “Personal Credit Report” each year using a Web site called www.AnnualCreditReport.com

Also, you may be entitled to additional free “Personal Credit Reports” within 60 days of notification that your credit was used to deny or adversely impact your efforts to secure one or more of the following:

• Credit
• Employment
• Insurance
• An apartment rental
• A government license

You may also be entitled to a free “Personal Credit Report” if you have been unemployed, the recipient of public welfare, or if you have reason to believe info on your credit report is inaccurate due to fraud.

Is It Time to Buy?

The New Hampshire Association of Realtors (NHAR) recently addressed “buyer hesitation” in the homebuying market. They noted that many buyers, particularly those who are not in a hurry, are hesitating purchasing a property because they believe that prices are likely to be lower in the near future. According the the NHAR, this represents a significant shift in the psychology of home buyers from a year or two ago (when most of them thought home prices would keep rising).

The question they try to answer is this: When will this hesitation-leaning consumer sentiment regarding housing start to turn into a now-is-the-time-to-buy attitude? They concluded that:

• if average wages continue to rise, and
• if second home buyers remain in the picture

then the consumers’ perception is likely to be that home prices are stabilizing and it's time to buy.

Good Reasons to Buy an Existing Home

Yesterday, I discussed good reasons to buy a new home. Today, I'll cover why you should consider buying an existing home:

• Existing features When you buy an existing home, you usuallydon't have to worry about buying the extras, such as blinds for the windows, a security system, an irrigation system, or a landscaped backyard.


• Land In many areas, new homes may be built on smallerlots than older properties.


• Established neighborhoods You know who your neighbors are before you move in.


• Mature landscaping Less maintenance will be required than when nurturing new plantings.


• Cost savings New homes cost more in labor and material costs.


• Track record When you purchase an existing home, you know how much the property has appreciated over the years.


• More room for negotiation Builders have a number of costs to recoup when developing a new community. You may have more flexibility with a motivated seller.

Ultimately, what you decide to buy is an individual choice. Whether you buy new construction or a pre-owned property, it's hard to go wrong. In the end, it's all the same: you've bought a home that is to your liking....

Good Reasons to Buy a New Home

Buying a home is both a logical and emotional decision for most people. Whether to buy new or used will continue to be a topic of discussion as long as there are homes to sell.

Here's why you should consider buying new:

Easier to comparison shop... and save! All new homes are the same age and options are listed upfront. Price breakdowns make it easy to spot a good value. Also, when builders compete, buyers benefit. Builders are now offering thousands of dollars in incentives and attractive financing options to earn your business.

Warrantees New homes carry better and better new home warranties. Options are available include:

• specific warrantees by individual builders
• third-party limited insured warranties against major structural defects
• appliance warranties

Better Products Up-to-date technology in construction, frequent and timely inspections, and features that reflect consumers' changing needs are showcased in new home construction.

Energy Efficiency New construction needs to adhere to stricter energy codes. Your new home will cost less to heat in the winter, less to cool in the summer.

Site Selection You get to choose the lot. Do you want to be near a lake, on a cul de sac?

Designed for You! Builders of new homes offer a variety of functional floor plans to fit your unique requirements. You may be able to eliminate or add rooms, upgrade materials, include additional architectural details, and generally customize the home.

More space! New homes typically offer greater square footage, more bathrooms, larger garages, and greater storage space than existing ones.

Choice of Finishes A new home is new. It's yours and no one else has ever laid claim to it or lived in it. You get to choose the carpet styles and colors, tile, cabinet stains, wall coverings, appliance colors, lighting fixtures, exterior color, and more.

Lower Maintenance Costs You'll be far less likely to worry, "How long until THIS breaks down?" The answer is simple: much longer when you're the first to use everything.

Looking for a great rate on your next new home? Call Compass Mortgage at (603) 472-2272 or e-mail me at charley.farley@weloannh.com.