Fannie Mae and Freddie Mac are both government-sponsored agencies that buy home loans from lenders. Here is the scoop on what they’re all about and why they matter to you.
Fannie Mae is the Federal National Mortgage Association that was founded in 1938. Fannie Mae purchases home loans from commercial/retail banks to sell as mortgage-backed securities.
Freddie Mac is the Federal Home Loan Mortgage Corporation, founded in 1970, and mainly purchases home loans from smaller “thrift” banks to sell as mortgage-backed securities.
Fannie Mae and Freddie Mac matter to you because they create a market for mortgages, keeping your interest rates lower and helping you by offering more favorable qualifying terms. These agencies are part of the reason that we have fixed term home loans in the United States, making homeownership a reachable goal for more borrowers!
Fannie Mae and Freddie Mac Loans - Who Are They For?
Fannie Mae and Freddie Mac loans are more generally referred to as conforming loans or “qualifying mortgages” (QM). Loans that conform to the federal guidelines are able to be sold to these agencies. Because of that, lenders are able to offer these government-sponsored loans with more affordable terms to borrowers. Both types offer low down-payment options as well.
These loans can be great for first-time home buyers as well as buyers trying to qualify for conforming loans in high-cost areas. The loan limits range from $453,100 up to $679,650 for high-cost areas and vary by county, helping make these affordable options available to many borrowers.
APM offers Fannie Mae and Freddie Mac mortgage loan programs that you can take advantage of now: Fannie Mae HomeReady™ and Freddie Mac HomePossible Advantage℠.
Fannie Mae HomeReady™ Loan Program
The HomeReady™ program is a conventional low down payment mortgage loan with flexible income qualification guidelines. It also may have reduced mortgage insurance options, including no upfront mortgage insurance fees and may be cancelable per servicer/Fannie Mae guidelines.
- Fixed rate loan up to $453,100
- Up to 97% LTV financing (3% down)*
- Eligible properties are single family-dwellings, PUD or condos as owner’s primary residence
- Gift funds or Community seconds are allowable for down payment
- Non-occupant co-borrower’s income can be used for qualifying
- Single-family accessory unit or boarder income can be used in qualifying
*Please visit our Disclosures page for more details on loan types.
Freddie Mac HomePossible Advantage℠ Loan Program
The HomePossible Advantage™ program may work for you if you are looking to purchase a home with a low down payment and flexible sources of funds.
- Max loan amount up to $453,100 for single-family dwellings in most US counties and $679,650 for high-cost areas**
- Up to 97 percent LTV financing (3 percent down)*
- Down payment assistance programs and/or affordable second mortgages available
- Flexible sources of funds can be used for qualifying
- Low to moderate-income buyers
- Lower mortgage insurance coverage requirements, which means lower payments
* Please visit our Disclosures page for more details on loan types.
** Each county limit is published on FHFA's website: www.fhfa.gov. Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam and the U.S. Virgin islands.
Most of what happens with Fannie Mae and Freddie Mac is behind the scenes for you, the consumer. But it’s helpful to understand how these agencies work and more importantly, that they help bring affordable loans and lower down payments to you, bringing you closer to your homeownership dream!
As you consider our loan programs, our knowledgeable APM loan advisors can help you think through all of your options and navigate which loan program is for you. Contact us today - we’re here for you!