Fannie Mae offers 97-percent loan-to-value financing options that help lenders provide mortgage loans to qualified borrowers, according to the agency’s website. The agency also offers single-family construction-to-permanent financing, and it offers the Home Style Renovation Program that helps borrowers finance home improvements during purchase or refinance transactions.
The loan-to-value ratio, known as the LTV, is the mortgage amount divided by the appraised value of the property, explains Investopedia. Banks and lending institutions use the ratio to assess the amount of risk associated with mortgage loans. A 97-percent LTV allows borrowers to finance up to 97 percent of the appraised value of homes.
Construction-to-permanent loans allow homebuyers or homebuilders to obtain financing during the construction process, explains Steve McLinden of Bankrate. Upon completion, the construction-to-permanent loans usually roll over into traditional mortgages. Fannie Mae does not provide mortgages directly to borrowers, states Investopedia. However, the agency purchases mortgages directly from lenders then guarantees the mortgages as asset-backed securities in the secondary mortgage market. Fannie Mae requires that lenders meet specific underwriting criteria before it purchases mortgages. Therefore, lenders must qualify loans based on Fannie Mae’s guidelines to ensure the credit quality of the mortgages. The conforming loan amounts are $417,000 for most areas of the country and $625,000 for high-cost areas, such as Alaska or Hawaii, as of 2014.