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Home Equity Loans
The Source of Mortgage Money
When you show up at the local bank or credit union to ask for a mortgage, they do not actually use their own funds when lending you the money. Almost all mortgage money comes from 3 major financing institutions, which are: Fannie Mae, Freddie Mac and Ginnie Mae. These institutions used to be subject to a lot of federal control, but over the years that has changed and most of these financial institutions are run strictly like a privately run company.
What Fannie Mae, Freddie Mac and Ginnie Mae do is that they buy a variety of loans from lenders (banks, credit unions, mortgage banks, etc.) and package similar loans into groups that are referred to as mortgage-backed securities.
- Mortgage-Backed Securities are:
- Basically a bond whose cash flow is backed by mortgage payments.
- A mortgage-backed security is an asset backed security where the assets are mortgages.
- Sold to investors
Other sources:
Homebuyers typically find the home they want to purchase first then find a mortgage that will work for them, but a potentially better way to do things is in the reverse. You investigate your chances of qualifying first, by estimating the amount you have available to spend and what type of home you can afford.
You can also plot your course to home ownership by pre-qualifying for a home. This is a accurate estimate, from which your mortgage specialist will tell you if you qualify for a mortgage and how much you may borrow.
There is a fee for pre-qualification, so make sure to ask your mortgage specialist whether it is appropriate in your case.
