Fannie Mae and Freddie Mac are differentiated in the Following Ways
In mortgage industry, you are most likely to encounter these two common companies, 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. Those companies take part in those markets where mortgage loans are being sold, by buying those loans, banks will be able to recover their money and continue with their business. Fannie Mae and Freddie Mac were both formed under government act to help with mortgages. The following are some of the distinct differences between the two companies despite their first impression similarities.
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. It was formed to help through low to high income earners. It started off by buying those loans that were insured by the government. In 1970, the United States government founded the Freddie Mac company to create a competitive industry. Fannie Mac company started buying uninsured mortgages after formation of Freddie Mac.
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.
The two companies ask for down payment but of varied worth basing on their set terms and conditions. Interest rate can be fixed or varied, this strongly form the basis for down payment calculation for the Fannie Mae. Flexible down payment charged by Freddie Mac varies normally between 3 to 5 percent basing on complete lot of different conditions. Under completely different terms, the installment periods also differ.
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. 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.
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