Fannie Mae Loans


Fannie Mae (the Federal National Mortgage Association) is a publicly-traded, government-sponsored enterprise (GSE) chartered by Congress for the purpose of increasing homeownership and providing liquidity to the mortgage market. Fannie Mae exists to create affordable housing opportunities around the country. 

Fannie Mae itself does not originate loans. 

Instead, the organization purchases and guarantees mortgages via the secondary mortgage market. By investing in mortgages, Fannie Mae creates liquidity for lenders—banks, funds, credit unions—to underwrite more mortgages for prospective homeowners. 

Fannie Mae purchases and guarantees various types of mortgages, including single-family and multifamily mortgages. 

In this article, we’ll break down key features of Fannie Mae loans, explore pros and cons, describe common use cases, and much more. 

Wondering whether a mortgage backed by Fannie Mae mortgage is right for you? 

Keep reading! 


Key Features


Fannie Mae does not originate mortgage loans. 

Instead, Fannie Mae promotes the flow of funds through the mortgage market by purchasing and/or guaranteeing mortgages issued by lenders—third parties like credit unions, banks, or other financial institutions. 

After Fannie Mae purchases loans on the secondary mortgage market, it pools these mortgages together as mortgage-backed securities (MBS). A MBS is a security that’s backed by a mortgage (or a pool of mortgages). 

Mortgage-backed securities created by Fannie Mac are then available for purchase by institutions like investment banks, insurance companies, pension funds, and more. 

Fannie Mae guarantees the payment of principal and interest on these MBSs. 

Fannie Mae creates liquidity in the mortgage market by providing funds to lenders through the purchase of their mortgages. 

These lenders then use the funds from the sale of these mortgages to underwrite additional mortgages. 

Last year Fannie Mae provided over $1.4T in liquidity to the mortgage market, helping lower-income Americans buy, refinance, or rent around 6 million homes. 


Single-Family vs. Multifamily Loans

Single-Family Loans

Fannie Mae operates along two primary lines of business: Single Family and Multifamily Loans. 

Fannie Mae’s Single-Family business helps mortgage lenders safely, efficiently originate mortgages. Specifically, Fannie Mae provides funding to preserve the standard 30-year, fixed-rate mortgage. 

This type of mortgage lets homeowners benefit from stable, predictable mortgage payments over the life of the loan. 

Fannie Mae’s Single-Family products include: 



Refinancing your mortgage can make homeownership more affordable and sustainable by decreasing your monthly payments. 

Unfortunately, refinancing isn’t always available to the property owners who need it most. 

Fannie Mae’s RefiNow program is a new refinance mortgage option with flexibility that makes it easier and less expensive for qualifying homeowners to reduce their monthly housing costs by taking advantage of today’s historically low-interest rates. 

Visit Fannie Mae’s website to learn more about the ReFiNow program. 



Fannie Mae’s HomeReady Mortgage is the premier affordable lending product designed for creditworthy low-income borrowers. The program leverages innovative underwriting flexibilities to expand access to credit responsibly. These flexibilities include rental units and border income, as well as non-occupant borrowers, such as parents.

Learn more about Fannie Mae’s HomeReady Mortgage option here.



Fannie Mae’s HomeStyle Renovation is a conventional mortgage that lets borrowers finance improvements, renovations or repairs to a home at the time of purchase or as a refinance transaction—up to 75% of the as-completed appraised value of the property! 

It’s a simple, flexible, and affordable option for the next generation of homeowners and real estate investors.

Learn more about Fannie Mae’s Homestyle Renovation program here.



With a shortage of affordable, site-built homes in many parts of the country, manufactured housing (MH) may be a good solution when you’re looking to purchase a home. 

The MH Advantage program is a new homeownership option that offers innovative and affordable financing on specially designated MH homes that feature site-built characteristics. 

Talk to your lender or learn more about Fannie Mae’s MH Advantage program here.



Homeowners are renovating like never before. Fannie Mae’s HomeStyle Renovation loan gives you the funds for a wide range of renovation projects—from repairs and energy updates to landscaping and luxury upgrades. 

Learn more about Fannie Mae’s HomeStyle Energy program here.


Multifamily Loans


Fannie Mae offers a wide variety of financing products for multifamily properties. 

The heart of Fannie Mae’s multifamily business is its Delegated Underwriting and Servicing (DUS) program. 

The DUS model leverages private capital in order to finance multifamily housing around the country. 

Fannie Mae works with a network of customers to finance apartment buildings and other multifamily properties. 

DUS-approved lenders underwrite, close, and deliver loans on behalf of Fannie Mae; they also share in the risk of loss on the loan.

Fannie Mae provides liquidity to the multifamily mortgage market by securitizing multifamily loans into MBSs. 


Pros of Fannie Mae Loans


There are many benefits to each type of loan offered by Fannie Mae—visit the above links to learn more about the details of each Fannie Mae Loan product. 

Two of the largest benefits of Fannie Mae loans? 

Competitive interest rates and low down payment options.

Another huge benefit of Fannie Mae loans is that lenders love making these loans. That’s because there’s a ready market where lenders can sell the loans, make a profit, and acquire more capital to make additional loans.


Cons of Fannie Mae Loans


Despite all their benefits, Fannie Mae loans do come with some specific downsides.

For instance, you’ll need a higher credit score to qualify for a Fannie Mae loan than for an FHA loan—FHA loans require a minimum credit score of 500.

Additionally, for Fannie Mae’s HomeReady low-down-payment program loans, you aren’t allowed to make more than the median income limit. 

If you’ve experienced major credit events—a bankruptcy or foreclosure—you’ll need to wait longer to get approved for a Fannie Mae conventional mortgage as compared to other government-backed loans.

Plus, if you have a low credit score, you’ll pay higher mortgage insurance premiums than you’d pay for FHA mortgage insurance.

Despite these downsides, Fannie Mae loans can be a great way to finance the purchase of your new home or property! 


Fannie Mae Loan Use Cases


Fannie Mae loans can be a great option for purchasing your home or other real estate investment.  

When you’re purchasing a home or property, you have multiple options: mortgages through banks or credit unions, online lenders, or government-sponsored entities like Fannie Mae.

The best choice for you will depend on your current financial situation and the type of property you’re purchasing.  

The most important thing to remember about Fannie Mae loans is that they do not lend directly to homebuyers or real estate investors. Instead, Fannie Mae acts as a bridge between lenders and borrowers who can both benefit from Fannie Mae-backed mortgages.


Fannie Mae Loan Requirements


Depending on the mortgage product, the requirements for each different type of Fannie Mae loan will vary.

The following table gives an overview of the general requirements to keep in mind when you submit your application for a Fannie Mae loan.


Fannie Mae Guideline Minimum Requirement
Down payment amount  3% of loan amount for a primary residence 
Credit score 620
Total debt-to-income ratio Must not exceed 45%, exceptions for up to 50% 
Cash reserves  Up to 6 months. Depends on credit score, down payment amount, DTI ratio, property and occupancy type
Income  2-year history of stable employment and income, exceptions sometimes allowed
Loan limits $548,250, higher amounts available in certain parts of the country
Home value  Property appraisal is usually required 
Title  Free of any previous ownership claims
Property types Single-family homes, 1-4 unit homes, manufactured homes attached to permanent foundations, condominiums, co-ops, planned unit developments (PUDs)
Occupancy types  Owner-occupied homes, vacation/second homes, investment properties
Mortgage insurance Required for less than 20% down payment


Fannie Mae Loan Rates


For a 15 year Fannie Mae loan, the average interest rate hovers around 2.08%.

According to Fannie Mae’s Economic and Strategic Research Group, the 30 year rate should average 3% through the end of 2021. 




How can I apply for a Fannie Mae loan?

First, find a lender eligible to issue you a Fannie-Mae-backed loan. 

Once you’ve connected with a lender, you’ll need to fill out a Uniform Residential Loan Application, complete with financial information and documentation.  

This information will include things like your record of employment, gross income, and statements (W-2’s or 1099’s) to prove these numbers.

You’ll also need to provide your total monthly debt obligations, balances on credit cards, car payments, alimony, or child support.  

Lenders typically follow the 28/36 rule, which states that a household should spend no more than 28% of its monthly income on housing expenses, and no more than 36% on debt servicing (mortgages and car loans). 

Most Fannie Mae-approved lenders will accept a maximum debt-to-income (DTI) ratio of 36%. Some will even accept a DTI as high as 45% if the borrower meets credit score and reserve requirements. 

If your DTI ratio is too high, make a larger down payment to reduce your monthly costs. 

20% down payment is generally considered ideal, but some borrowers will put down as little as 3%. 

You’ll also need to meet minimum credit score requirements to secure a Fannie Mae-backed loan. 

For a single-family home used as a primary residence, you’ll need a FICO score of at least 620 for a fixed-rate loan, and a score of at least 640 for an adjustable-rate mortgage. 


What is the interest on a Fannie Mae loan?

For a 15 year Fannie Mae loan, the average interest rate hovers around 2.08%.

According to Fannie Mae’s Economic and Strategic Research Group, the 30-year rate should average 3% through the end of 2021.


Is it hard to get a Fannie Mae loan?

Getting a Fannie Mae-backed loan isn’t impossible, but you’ll need to present a decent credit score to your lender.

For a single-family home used as a primary residence, you’ll need a FICO score of at least 620 for a fixed-rate loan, and a score of at least 640 for an adjustable-rate mortgage. 

The better your FICO score, the lower your interest rate is likely to be!


Do I need to provide a down payment for a Fannie Mae loan?

Down payments for each of Fannie Mae’s loan products will vary.

However, Fannie Mae’s HomeReady and standard loan programs typically require a 3% down payment for a single-family home. 

This downpayment can come from your own cash, or via gift donation from a family member. 

To purchase a second home or an investment property, you’ll need to provide down payments of 10% and 20%, respectively.


Can I get a loan directly from Fannie Mae? 


Fannie Mae does not originate loans. 

Instead, the organization purchases and guarantees mortgages via the secondary mortgage market. 

By investing in mortgages, Fannie Mae creates liquidity for lenders—banks, funds, credit unions—to underwrite more mortgages for prospective homeowners.


Alternatives to Fannie Mae Loans


Fannie Mae loans can be a great option for purchasing a home or other forms of real estate. 

However, if a Fannie Mae loan won’t work for your financial needs, there are still other options. 

Check out 4 alternatives to Fannie Mae loans below.


  • FHA loans


FHA loans are backed by the Federal Housing Administration, and they offer low down payment options (minimum 3.5%) along with low credit score requirements (as low as 500, provided you commit to a 10% down payment). 

Learn more about FHA loans here


  • VA loans 


VA loans are backed by the Department of Veteran Affairs, and they’re available to active-duty US military members, military veterans, and surviving spouses. 


  • USDA loans


USDA loans are mortgage loans offered through the USDA (US Department of Agriculture), and they’re designed for low-and-moderate income borrowers living in rural areas. 


  • Jumbo loans 


Jumbo loans exceed the borrowing limits set by Fannie Mae and Freddie Mac for a conventional loan. Throughout the majority of the US, the borrowing limit rests at $548,250. High-cost regions have limits of up to $822,375.




Fannie Mae loans are a great option if you’re looking to purchase a home, a vacation home, or another investment property. 

Before you commit to a Fannie Mae loan, it’s important to get your finances in order and explore all your options. 

At Loanbase, we’re committed to making your loan journey as smooth and simple as possible! We connect borrowers with qualified lenders so that both sides can find mutually beneficial deals. 



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