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Differences between Freddie Mac and Fannie Mae
Fannie Mae and Freddie Mac are the most common names you will come across in mortgage industry. 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. With the assistance of these companies, financial institutions are in a good position to offer mortgage loans. Through such companies, some banks will be in a position to offer loans with extended time period over 30 years. 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. It was through an act of government that the two companies were established to help with mortgages. The two companies have well-defined differences despite their noticeable similarities, some of them are as shown on the next section.
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. It started off by buying those loans that were insured by the government. Market rivalry is good in altering prices, Freddie Mac was formed in 1970 to create that competitive environment. 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. Past records and credit score should be high for someone to deal with Fannie Mae. But with Freddie Mac, people with low credit may qualify for mortgage loans.
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. On the other hand, Freddie Mac charge a flexible down payment ranging from three percent to five percent. The installment periods too do differ under completely different terms.
For basis of conclusive comparison, click on the Fannie website’s link to learn more on their differences. 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. For those dealing with big financial institutions, their choice will be Fannie Mae. When these companies buy secondary mortgages loans, interests are regulated from accumulating to a huge value while in the banks which offered the loans remain in the business.