Is Freddie Mac a government loan?
Freddie Mac is a government-sponsored enterprise or GSE, created by the federal government to ensure access to home mortgage credit. Freddie Mac has a statutory mission to provide liquidity, stability, and affordability to the U.S. housing market. Freddie Mac does not make loans directly to homebuyers.
Fannie Mae and Freddie Mac are large companies that guarantee most of the mortgages made in the U.S. Together, they are also known as the government sponsored enterprises (GSEs). Historically, they were private companies operating with government permission and under government regulation.
Fannie Mae and Freddie Mac have a rigorous underwriting process that borrowers must go through in order to qualify for a loan. This process can take several weeks, and during this time, the lender will review your financial situation and the property you're buying in order to make sure it meets their guidelines.
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.
Both Fannie Mae and Freddie Mac are nationally recognized, federally backed mortgage institutions committed to providing the U.S. housing market with liquidity, stability and affordability. This mission for both government-sponsored enterprises, or GSEs, is crucial to the nation's housing finance system.
Freddie Mac was created when Congress passed the Emergency Home Finance Act in 1970. A wholly owned subsidiary of the Federal Home Loan Bank System (FHLBS), it represented an attempt to reduce interest rate risk for savings and loans associations and smaller banks.
- Flexible loan sizes, starting at just $750,000 and going up to $7.5 million.
- Low interest rates, starting from just 4.51%
- High leverage, up to 80% LTV.
- Generous DSCR minimums, as low as 1.20x.
- 30-year amortizations, keeping payments low for borrowers.
| Number of Units | Maximum baseline conforming loan limit values for properties NOT in Alaska, Hawaii, Guam and U.S. Virgin Islands | |
|---|---|---|
| 2024 | 2023 | |
| 1 | $766,550 | $726,200 |
| 2 | $981,500 | $929,850 |
| 3 | $1,186,350 | $1,123,900 |
In the complaint against the former Freddie Mac executives, the SEC alleged that they and Freddie Mac led investors to believe that the firm used a broad definition of subprime loans and was disclosing all of its Single-Family subprime loan exposure.
The Mortgage must have a minimum Indicator Score of 620. If no Borrower has a usable Credit Score, then the Mortgage does not have an Indicator Score and is not eligible for delivery to Freddie Mac.
What is the minimum credit score for Freddie?
Fannie Mae and Freddie Mac each have their own eligibility requirements for mortgage approval. Down payment: A minimum down payment of 3% is required. Credit score: Both Fannie Mae and Freddie Mac require a minimum credit score of 620 for fixed-rate mortgages.
For Borrowers with a usable Credit Score, a minimum Indicator Score of 620 is required. Sellers should refer to Exhibit 25, Mortgages with Risk Class and/or Minimum Indicator Score Requirements, and to the Guide sections referenced in Exhibit 25 for minimum Indicator Score requirements.
Fannie and Freddie loans have competitive interest rates and low down payment options. But the biggest benefit of Fannie and Freddie loans: They are the mortgages most lenders prefer to make. There is a ready market where lenders can sell the loans, earn a profit and gain more capital to make additional loans.
Income limit: Your total annual income cannot exceed 80% of your area's median income (AMI). Check out Freddie Mac's income lookup tool to find the income limit in your area. Loan-to-value ratio (LTV): The LTV you'll need to qualify for a Home Possible loan ranges from 80% – 105%.
Perhaps the most notable differences between a Freddie Mac Home Possible Loan and an FHA Loan are the upfront funding fees and mortgage insurance policies. A Freddie Mac Home Possible Loan requires neither an upfront funding fee nor mortgage insurance.
About Freddie Mac
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.
We encourage you to contact your servicer (often your bank or lender) to verify that your mortgage loan is owned or guaranteed by Fannie Mae or Freddie Mac, or you may verify it yourself by accessing the following websites: Fannie Mae www.KnowYourOptions.com/loanlookup, Freddie Mac www.freddiemac.com/mymortgage.
And we continue to lead the housing industry forward, building a better housing finance system – for today and for tomorrow. 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.
Many mortgages are owned by Fannie Mae and Freddie Mac. Both offer a mortgage look up tool on their website. You can look up your mortgage servicer by searching the Mortgage Electronic Registration Systems (MERS) website.
You can find out if Freddie Mac owns your loan by using our self-service loan look-up tool.
Why do banks sell loans to Freddie Mac?
Delivering mortgage loans to the secondary market through Freddie Mac can help community banks access sustainable affordable mortgage products and responsibly expand mortgage business opportunities while limiting long-term credit, prepayment, and interest rate risks.
Lenders often bundle loans together (usually those with similar risk attributes) and sell them to investors. These investing companies (typically government agencies like Fannie Mae and Freddie Mac) then sell them as bonds. In the big picture, this practice helps keeps rates competitive and boosts the economy.
As a cornerstone of U.S. home financing, Freddie Mac purchases a variety of fixed-rate mortgages. Our fixed-rate mortgage offerings leverage the power of a fixed interest rate for the life of the loan.
For 2024, the FHFA (Federal Housing Finance Administration) set the baseline conforming loan limit (CCL) for 1 unit properties at $766,550 (up 5.5% from 2023) for Conventional financing (Fannie Mae & Freddie Mac) and up to $1,149,825 in California high cost counties.
Conforming vs.
You may be able to borrow more than the conventional loan limit of $766,550 to buy a house if you can get approved for a "non-conforming" loan. These are also called jumbo loans because they can exceed the conventional loan limit.
References
- https://www.sec.gov/news/press/2011/2011-267.htm
- https://www.freedommortgage.com/learning-center/articles/conventional-loan-limits
- https://www.consumerfinance.gov/ask-cfpb/how-can-i-tell-who-owns-my-mortgage-en-214/
- https://www.rocketmortgage.com/learn/home-possible
- https://aeiconsultants.com/5-mistakes-to-avoid-when-financing-with-fannie-mae-or-freddie-mac/
- https://myhome.freddiemac.com/blog/homebuying/understanding-common-types-of-mortgage-loans
- https://apartment.loans/posts/what-are-the-pros-and-cons-of-the-freddie-mac-sbl-program/
- https://www.cmgfi.com/blog/low-down-payment-options-fha-loan-vs-freddie-mac-home-possible-loan-10-08-2020
- https://homeloanartist.com/california-fha-va-conventional-conforming-loan-limits/
- https://www.freddiemac.com/about/faqs
- https://www.fdic.gov/resources/bankers/affordable-mortgage-lending-center/guide/part-1-docs/freddie-mac-overview.pdf
- https://www.rocketmortgage.com/learn/fannie-mae-vs-freddie-mac
- https://www.investopedia.com/terms/f/freddiemac.asp
- https://www.freddiemac.com/about/contact-us
- https://guide.freddiemac.com/app/guide/section/5202.4
- https://guide.freddiemac.com/app/guide/bulletin/2021-17
- https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Issue-with-Fannie-Mae-or-Freddie-Mac.aspx
- https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/fixed-rate-mortgages
- https://money.usnews.com/loans/mortgages/articles/what-is-fannie-mae
- https://www.freddiemac.com/about/business
- https://sf.freddiemac.com/articles/news/loan-limit-values-for-2024
- https://www.nerdwallet.com/article/mortgages/fannie-mae-freddie-mac
- https://www.readynest.com/homebuyer-stories/what-does-it-mean-for-you-when-your-loan-is-sold-to-another-mortgage-loan-servicing-company
- https://www.consumerfinance.gov/ask-cfpb/what-are-fannie-mae-and-freddie-mac-en-1959/
