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Differences between Freddie Mac and Fannie Mae
The most common names that you will come across in mortgage industry include the 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. 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 following are some of the distinct differences between the two companies despite their first impression similarities.
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. 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. Fannie Mac company started buying uninsured mortgages after formation of Freddie Mac.
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. Fannie Mae was specifically designed for existing or new clients with an outstanding credit score. On the other hand, people with poor credit score may be eligible for loans from 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.
Click on the Fannie website’s link to learn and discover more info for basis of comparison. 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.