Freddie Mac Loans
The Federal Home Loan Mortgage Corporation, also known as FHLMC, is typically referred to as Freddie Mac. It is a government-sponsored enterprise put in place in 1970 as a way to open up new options in mortgages for consumers in the United States and plays a big role in providing access to loans today.
What Is a Freddie Mac Mortgage?
Freddie Mac mortgages are home loans that are very versatile. Here is what typically occurs. A home buyer obtains a loan through a mortgage lender. Then, a grouping of those loans from multiple people, are sold on a secondary market. Freddie Mac purchases these mortgages on that secondary market. In doing so, it allows for other people and companies, all investors, to purchase them on the open market. That does not mean that a consumer will have a third party managing their funds, but rather the buying and selling of these loan portfolios is an investment opportunity for some to take advantage of.
Why are Freddie Mac mortgage loans sold in this manner? In short, by providing a Freddie Mac mortgage investment opportunity like this, it opens up the supply of money available for mortgage lending in the United States. In short, it allows for more people to have access to lower-cost loans because there is more money to lend – money that comes from those investors to purchase portfolios of these mortgages at one time and the buying and selling of them that raises their value.
Freddie Mac is a shareholder-owned company. It operates, though, under a congressional charter. It is not directly a federal government department, but there are very stringent guidelines in place to manage this market.
What Type of Freddie Mac Home Loans Are Available?
One of the key benefits of Freddie Mac home loans is that they offer a wide variety of options for home buyers. Again, this agency does not provide the loans directly and consumers cannot apply for a loan through them. However, it does help with funding a wide range of options that appeal to home buyers. Some of those are here:
Fixed Rate Mortgages
Most Freddie Mac home loans are fixed-rate mortgages. This includes 15, 20, and 30-year loans, cash-out refinances, and those designed for condos. It includes energy-efficient property loans, construction conversation loans, and manufactured housing loans. Freddie Mac home loans are also available for rural housing, renovation mortgages, and Home Possible Mortgages.
Adjustable Rate Mortgages
For those looking for the lowest Freddie Mac home loan rates, adjustable rate loans may be an option. Freddie Mac home loan rates for adjustable rate loans are lower than most others. However, as with any type of loan, consumers need to compare Freddie Mac home loan rates against others. The agency offers cash-out refinance, efficient properties, CMT-indexed adjustable rate loans, and Home Possible Mortgages with adjustable rates. It also backs buydown mortgages, investment property mortgages, and loans with secondary financing.
Freddie Mac Business Loans
Some Freddie Mac business loans may be available for investment property purchases. However, this depends on the underlying investment. Freddie Mac lenders will place specific requirements on what the loans can be used for. Individuals have to meet the qualifications set by the lender to obtain these loans.
Freddie Mac Loan Guidelines
Freddie Mac loan guidelines are set by the organization. These are the guidelines they will accept in order to provide funding for a loan to a mortgage broker or lender.
For first liens on a home, the property is generally a single-family home or a 1 to 4 unit primary residence. It can include cooperatives, condominiums, and other forms. Manufactured homes can be an option.
The organization offers standard and jumbo mortgage loans to those who qualify.
FHA, VA, and RHS mortgages are also capable of being Freddie Mac loans.
Who Meets Freddie Mac Loan Eligibility?
Individual consumers should focus on meeting the goals of a lender, rather than Freddie Mac loan eligibility. Most commonly, these requirements include:
- A credit score of at least 580 (sometimes this may be up to 640 as a minimum for conventional loans)
- Debt to income ratio is typically under 45 percent
- Individual borrowers should not have derogatory credit in the previous three years including foreclosures, bankruptcies or short sales; this may also include judgments of any type
- Housing debt to income ratio is generally under 35 percent
- Individuals must have verifiable income, often with at least two years of steady income coming in; those who are a recent graduate of college may not have this but may still meet requirements
A down payment is necessary, but how much depends on the loan type. Verification of where the down payment came from plays a role here as well.
How to Fill Out a Freddie Mac Loan Application
Consumers interested in obtaining a Freddie Mac loan application should visit any approved Freddie Mac lender. Most mortgage lenders today including mortgage brokers can do this. Individuals will need to first meet the lending criteria set by that particular lender. It will be based on the type of loan the individual desires as well as the best types of loans for their individual needs. Factors like income, previous buying history, and credit will play a role in this.
Freddie Mac loans are just one option. Others exist as well. From a consumer point of view, the goal is simply to find the most affordable and accessible loan for their needs. Most consumers will never have to deal with or interact with Freddie Mac on their own, but rather the mortgage lender they borrow the funds from will continue to operate as their loan servicer unless the loan is sold to a third-party organization.
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