Your New Mortgage Just Got More Expensive

Buyer, Mortgages

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In order to understand how Fannie Mae and Freddie Mac are going to be costing you more money in the future you need to know the “Life of A Loan”.

“Life of A Loan”

Here is a simplification of the process:

You get a loan from a Mortgage Broker.

The Mortgage Broker contracts for you to get the funds from a Lender.

The Lender gives you the funds in return for the Note that you sign agreeing to pay them X% per month on the amount they loaned you.

The Lender bundles all the Notes together and sells them to Fannie Mae or Freddie Mac. They then take this cash and fund more loans from the Mortgage Broker.

Fannie Mae or Freddie Mac can them sell the Notes to investors with a guarantee that the investor will get their monthly payment.

So What is New?

Fannie Mae introduces a new .25 percent up front charge on all new mortgages that it buys or guarantees. Freddie Mac is rumored to have a similar fee soon. This is a charge they are going to levy on the Lender who sells them the notes.

The Lender being a for profit business will pass this charge on to the Mortgage Broker who will kindly pass that charge on to you, The Consumer.

What do I do?

So if you are currently looking for a property and haven’t locked in your mortgage rate then you should contact your Mortgage Broker and discuss the implications of this move by Fannie Mae and Freddie Mac on your wallet.

Mortgage amounts over the conventional limit are not bought or guaranteed by Fannie Mae or Freddie Mac, so this will not affect those with mortgage amounts over $417,000

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Date: Wednesday, December, 12th 2007 @ 03:57:00 PM
Views: 519

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