When applying for a mortgage, you can choose from many loan types, anything from a fixed-rate mortgage in which your interest rate will never change to an adjustable-rate mortgage in which your interest rate can rise or fall during the life of your loan. But all these mortgages fall into two main categories: conforming and non-conforming loans.
Conforming loans are those that meet certain limits set by the Federal Housing Finance Agency. Freddie Mac – and Fannie Mae – can only purchase conforming loans from lenders. It is not allowed to buy non-conforming loans.
Each year, the Federal Housing Finance Agency sets a maximum conforming loan limit. Any mortgage loans for higher than that amount are categorized as non-conforming loans. For 2024, the conforming loan limit in most parts of the country for single family homes is $766,550, an increase of $40,350 from 2023. In higher-cost areas of the country such as New York, California and Hawaii, the conforming loan limit can be more than $1.149 million.
Any loans for higher than an area's conforming loan limit will be qualified as a non-conforming loan and not eligible for purchase by Freddie Mac.
Freddie Mac has other requirements for what it considers a conforming loan. For example, when using a mortgage to finance the purchase of a one-unit primary residence, borrowers taking out most mortgage loans must come up with a down payment of at least 5%. Borrowers who take out a Freddie Mac HomeOne mortgage, though – available to first-time home buyers – can provide a down payment of just 3% of a home’s purchase price and still have their mortgage qualify as a conforming loan.
Why does it matter if a loan is conforming or non-conforming? Taking out a conforming loan can save you money. Conforming loans generally come with lower interest rates because lenders are taking on less risk. Because Freddie Mac can purchase such loans, lenders might not have them on their books for 15 or 30 years. If lenders feel that they are taking on less risk, they won’t need to charge you a higher interest rate. That’s good for you: Higher interest rates result in higher monthly payments. Lower rates mean lower monthly payments. Freddie Mac and Fannie Mae, then, help make it possible for borrowers to qualify for mortgage loans at lower interest rates.
It's important to remember, though, that Freddie Mac does not originate its own mortgages. You’ll have to apply for a mortgage with a bank, credit union or lender. If your mortgage qualifies as a conforming loan, Freddie Mac might buy it. But you can’t approach Freddie Mac directly and apply for a home loan.
(GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders, which in turn supports homeownership and rental housing for middle-income Americans.
What Does The FHLMC Do? Freddie Mac has an important mission: to increase liquidity in the mortgage market. This makes it possible for mortgage lenders to continue offering home loans to consumers. Freddie Mac uses the secondary mortgage market to do this, buying mortgages from private lenders.
Fannie Mae sells loans that originate with large commercial banks. Freddie Mac deals with the smaller savings associations and credit unions. Both of them deal with conventional mortgages. Ginnie Mae serves the same function but focuses on government-backed loans, such as FHA and VA.
Freddie Mac is a nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a shareholder-owned company that, like Fannie Mae, doesn't lend directly to consumers.
The Federal Home Loan Mortgage Corp.(FHLMC), or Freddie Mac, is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 to keep money flowing to mortgage lenders, which in turn supports homeownership and rental housing for middle-income Americans.
The two corporations each purchase their loans from different sources — Fannie Mae buys them from large banks and credit unions while Freddie Mac buys them from smaller banks and credit unions. Both entities purchase and sell conventional loans.
Lenders use the money from selling mortgages to Fannie Mae and Freddie Mac to originate more loans, widening the pool of money available for individuals and families to buy homes.
Credit score: Both Fannie Mae and Freddie Mac require a minimum credit score of 620 for fixed-rate mortgages. However, you may need a higher credit score for certain loan programs or to obtain better interest rates.
Freddie Mac operates in the U.S. secondary mortgage market. That means we don't lend directly to borrowers but buy loans that meet our standards from approved lenders. With the money that lenders receive in return, they can make loans to other qualified borrowers.
Conventional Conforming Loans: Lenders that make conventional conforming loans typically sell them to the Government Sponsored Enterprises (GSEs) Freddie Mac or Fannie Mae, as the loans conform to the GSEs' standards and meet loan amount limits set by the federal government.
Fannie Mae headquarters at 3900 Wisconsin Avenue, NW in Washington, D.C. As of 2022, Fannie Mae and Freddie Mac remain under conservatorship, and after more than repaying their Treasury loans are building capital reserves for an expected eventual exit.
Down payment: The Home Possible program requires a 3% down payment. Some eligible sources for down payment funds include cash on hand, gifts and grants. Credit score: You'll need a credit score of at least 620 to buy a house with a Home Possible mortgage.
Both Fannie Mae and Freddie Mac have nicknames derived from their full names: Fannie Mae from the Federal National Mortgage Association (FNMA) and Freddie Mac from the Federal Home Loan Mortgage Corporation (FMCC).
Explanation: The primary activity of Freddie Mac is to buy and pool blocks of conventional mortgages. This action is part of their role in the secondary mortgage market, where they increase the availability and affordability of homeownership in the United States.
They perform an important role in the nation's housing finance system – to provide liquidity, stability and affordability to the mortgage market. They provide liquidity (ready access to funds on reasonable terms) to the thousands of banks, savings and loans, and mortgage companies that make loans to finance housing.
Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market.
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