Last week I explained why banks require appraisals when you get a home loan. This practice didn’t start until 1980. I think one of the reasons was because in 1974 the Equal Credit Opportunity Act allowed women to get a credit card without a male co-signer and apply for mortgages and car loans without co-signers. This increased the demand for housing as for the first time in history in the U.S. women could buy on their own and were hungry to do so.

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) were created by Congress in 1938 as part of the New Deal after the Great Depression to support the housing finance system.  Their primary role is to buy mortgages from lenders, either holding them in their portfolios or packaging them into mortgage-backed securities (MBS) that are sold to investors. This process provides lenders with cash to issue more loans, ensuring a continuous supply of mortgage funds for homebuyers and investors in multifamily properties

By purchasing mortgages Fannie Mae and Freddie Mac reduce risk for lenders and investors, making loans more affordable and accessible to their customers.   They support the secondary mortgage market, which allows banks, credit unions, and mortgage companies to continue lending even during periods of financial stress which in the long run helps maintain lower interest rates. Fannie Mae and Freddie Mac support roughly 70% of all U.S. home loans.  They also promote affordable housing by backing loans such as conventional loans and require appraisals in most cases. And they just updated their appraisal forms that are now mandatory for all appraisal required transactions.

The rules for appraisals have been updated, and your lender may not require a traditional appraisal for a home mortgage. There are several alternatives now including drive by and desk appraisals when it’s a simple loan/purchase with strong comparable data. Your mortgage lender/bank/credit union is the one that determines whether or not an appraiser has to visit the property measure it, draw a floor plan, not any issues in condition or if an automated underwriting system will fit the need of the lender to prove value in the purchase.

Utah’s housing market is soft, which is great for buyers, but interest rates hover around 7% and may go up further with the next meeting of the FED this week.  The Kem C. Gardner Policy Institute here at the University of Utah reported last week that with an average monthly mortgage payment of $3,669, home ownership is out of reach for roughly 91% of renters here in our State.

Sure, rates can come down and there are deals to be found in housing, but you must start by getting pre-approved with a lender if you’re not paying cash. The lender can pull your credit and counsel you on options now to buy or help fix your credit so you can buy at a later date.