Pilot program targets first-time home buyers
A young woman in Minnesota was looking for the lowest possible monthly payment she could get with a fixed-rate mortgage. Instead of opting for the standard 30-year fixed-rate mortgage, she chose to stretch the loan an additional 10 years.
Now thanks to a 40-year fixed-rate mortgage, the woman can afford slightly more house than the first-time home buyer would've been able to purchase without it, said Brad Crandall, president of CU Mortgage Services. Owned by 54 Minnesota credit union organizations, CU Mortgage Services is one of about a dozen credit unions across the country to begin offering 40-year fixed-rate mortgages as part of a pilot program through Fannie Mae.
Interest in the loan has been slow so far, Crandall and others have said, but they expect it to pick up as interest rates increase and price out some first-time home buyers from the ever-appreciating housing market. Fannie Mae rolled out the pilot earlier this year to gauge how popular such a loan would be. The idea behind the extra 10 years is simple: Make houses more affordable to more consumers by extending the loan terms.
Still, the concept has been slow to catch on. Fannie Mae spokeswoman Sandy Cutts believes that's because interest rates are still so low.
"It's not quite the right time, ideal time, for it yet," Cutts said. "It's still building some momentum."
By the end of the year, Fannie Mae hopes to know how popular the 40-year mortgage is within the pilot programs, Cutts said. There is no timeline yet on whether Fannie will expand the pilot program to other lenders or make it a permanent offering.
Read more at Inman News