Differences between Freddie Mac and Fannie Mae
In mortgage industry, you are most likely to encounter these two common companies, Fannie Mae and Freddie Mac. Since those companies to not directly extend loans to users, people are inclined to neglect considering their importance. But these two companies greatly helps banks to continue offering loans as well as keeping the interests on loans low. These companies do play a big role in enabling banks to extend mortgage loans. Through such companies, some banks will be in a position to offer loans with extended time period over 30 years. Some loan lenders participate in a market where they sell such mortgage and it is those companies that buy such like mortgages. 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.
With the intention of ensuring proper housing irrespective of their backgrounds, the United States Government formed the Fannie Mae in 1938. Both the low and high income earners benefited from the company. The company was restricted to buying mortgage which was under protection cover 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.
Freddie Mac company deals with considerably smaller institutions compared to those dealing with Fannie Mae company, such big institutions such as Bank of America, Chase Bank and more. Past records and credit score should be high for someone to deal with Fannie Mae. But with Freddie Mac, people with low credit may qualify for mortgage loans.
Basing on different conditions, both companies charge different down payment. Down payment asked by Fannie Mae is calculated based on the rate of interests if fixed or inconsistent. Basing on the different terms set by Freddie Mac, their down payment varies between 3 to 5 percent. The installment periods too do differ under completely different terms.
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. One of the decisions you going to make will be selecting 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.