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Fannie Mae and Freddie Mac are differentiated in the Following Ways
The most common names that you will come across in mortgage industry include the Fannie Mae and Freddie Mac. People tend to overlook the importance of such companies due to the fact that they do not extend loans to borrowers. Apart from ensuring that interests on loans are regulated so as not to rise too high, those two companies helps banks pull through their business in the industry. With the assistance of these companies, financial institutions are in a good position to offer mortgage loans. Over 30 years term period for loans can be realized through such companies. By buying those mortgage loans in the market, those companies support banks to keep them running their businesses in the industry. It was through an act of government that the two companies were established to help with mortgages. The two companies have well-defined differences despite their noticeable similarities, some of them are as shown on the next section.
Fannie Mae was founded by the United States Government in 1938 with its main purpose being to help people irrespective of the backgrounds to get a home to live in. Both the low and high income earners benefited from the company. Fannie Mae begun by purchase mortgage loans that were protected under insurance policy by the government. In 1970, the United States government founded the Freddie Mac company to create a competitive industry. It was after formation of Freddie Mac that the Fannie Mae company was allowed to buy unprotected mortgages.
While Fannie Mae buys loans from those big commercial institutions such as Chase Bank and Bank of America, Freddie Mac buys loans from much smaller financial organizations which normally goes by the name thrift banks. Credit score for those wishing to deal with Fannie Mae should be high with no past poor records. But with Freddie Mac, people with low credit may qualify for mortgage loans.
The two companies ask for down payment but of varied worth basing on their set terms and conditions. Fannie Mae calculate the required down payment basing on the type loan rate whether fixed or variable. Flexible down payment charged by Freddie Mac varies normally between 3 to 5 percent basing on complete lot of different conditions. There are considerable differences in installment periods.
For basis of conclusive comparison, click on the Fannie website’s link to learn more on their differences. There are a lot of benefits of these two companies and should be considered while making mortgage loans decisions. Such decisions may include choosing which bank to borrow from. If you want to go big and deal with Fannie Mae, you should be having a good credit score and have borrowed from big banks. Involvement of these companies in the mortgage industry will regulate the interests while the banks are not pushed out of the market.