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. The importance of such companies is overlooked since people do get loan from them on first hand basis, but through secondary mortgages. 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. These companies do play a big role in enabling banks to extend 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. Fannie Mae and Freddie Mac were both formed under government act 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.
With the purpose of helping people acquire homes to live in irrespective of their of their backgrounds, the United State Government founded Fannie Mae in 1938. It was formed to help through low to high income earners. Fannie Mae begun by purchase mortgage loans that were protected under insurance policy by the government. Freddie Mac was founded much later in 1970 to promote competition in the mortgage industry. After its formulation, Fannie Mae was allowed to buy even those unprotected loans.
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. People with poor credit score, on the other hand, have a better chance with Freddie Mac.
Both companies do accept a down payment but the value vary basing on different conditions from the two companies. Fannie Mae calculate the required down payment basing on the type loan rate whether fixed or variable. Basing on the different terms set by Freddie Mac, their down payment varies between 3 to 5 percent. 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. These two companies will influence your decision while taking a mortgage loans. One of the decisions you going to make will be selecting which bank to borrow from. For those dealing with big financial institutions, their choice will be Fannie Mae. Interest rates will be regulated by such companies without affecting the banks operations in the industry.
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