What is the FNMA Standard Loan?
A Fannie Mae Standard is a conventional mortgage product designed to help qualified borrowers secure competitively priced home financing for conforming and high balance loan limits.
FNMA Standard Loan Basics
- Purchase and Refinance Options
- 620 minimum qualifying credit score; 680 minimum FICO if Lender Purchased Mortgage Insurance (LPMI)
- 10, 15, 20, 25, 30 year terms for fully amortizing fixed rate program
- 15 and 30 year fixed rate for high balance program
- Standard Appraisal requirements apply
- 1-4 unit primary homes
- 1-4 unit investment properties permitted
- 1-unit second homes
- FNMA Approved Condos/PUDs
- Single-width (cash-out, second homes and investment properties not permitted) and multi-width manufactured housing (investment properties are not permitted)
What are the benefits?
Low Monthly Payments
Fannie Mae offers competitive interest rates which help keep payments low. The 30-year term makes budgeting easier.
Fixed Payments
Fully amortizing fixed rate loans means the fixed rate never changes, and neither does the principal and interest payment. Many homeowners prefer a fixed interest rate because it provides a sense of stability and security; in contrast to adjustable rate loans with introductory interest rates that can move higher once the introductory period is over.
Increased Loan Limits for Higher Cost Areas
Fannie Mae sets higher loan limits in specific high-cost areas, as a reflection of the average home prices there. This means more homeowners can take advantage of this program and avoid jumbo financing, which is often more costly.
Who is eligible for a Fannie Mae Standard Loan?
Borrowers will need to meet the employment, credit, income, asset, and property requirements of FNMA loans. Other eligibility requirements include:
Minimum qualifying credit score of 620.
Eligible property types: One to Four Unit primary homes, One Unit second homes, One to Four Unit non-owner occupied residences, FNMA Approved Condos/PUDs, and Multi-width manufactured housing. Manufactured housing is not permitted as an investment property. Single wide manufactured housing and Co-ops are not permitted.
In which scenarios is the FNMA Standard Useful?
A widely used and versatile program, the FNMA Standard mortgage can be a great fit for many purchase and refinance transactions. When not limited by specific restrictions such as not having any funds available for a down payment, or having poor credit, this can be an excellent choice offering low mortgage rates.
This product can be used by first time or move up home buyers, and buyers of a second homes or investment properties. Current homeowners interested in refinancing have both rate and term and cash out options.
Buying a Home with a FNMA Standard Loan
Borrowers should know their goals before deciding on a term length for a FNMA Standard loan. 30 year terms are feasible to many because the monthly payments will be lower, but extending a mortgage means it will take longer to build equity through repayment. It is always possible that additional equity will be gained through an increase in property value.
FNMA Standard Refinancing
The FNMA Standard Loan is an ideal loan solution for home buyers, but it’s also an exceptional product for existing homeowners who want to refinance. Whether borrowers are looking for a shorter term mortgage to save money and interest and pay off the loan sooner, or want to consolidate debt or have funds available for other expenses through a cash out, this program can be a great fit.
Other Programs to Consider:
If the FNMA Standard is not an ideal fit for a particular scenario here are a few other products to explore:
- Low down payment, 30 year fixed option: FHA 203(b) Standard
- 100% financing for eligible members of the US military and veterans: VA Loan
- No money down mortgage for low to moderate income borrowers in rural areas: USDA Mortgage
