If you are in the market to buy or sell a home or have ever bought or sold a home, you have probably heard of Freddie Mac. Freddie Mac, also known as the Federal Home Loan Mortgage Corporation (FHLMC), is a government-sponsored entity that plays a vital role in the mortgage industry and the process of buying and selling a home.
Freddie Mac is just one of many mortgage options that may be available to you. Knowing the many options available can help you better understand the mortgage process, whether you are a homeowner, homebuyer, or renter.
What is Freddie Mac?
Freddie Mac is a government-sponsored enterprise (GSE) created by Congress to help keep money flowing to mortgage lenders to support homeownership and rental housing for middle-income borrowers.
Freddie Mac’s mission is to provide liquidity, stability, and affordability to the U.S. housing market.
How Do Freddie Mac Loans Work?
Freddie Mac and Fannie Mae purchase mortgages from lenders and hold the mortgages in their portfolios or package the loans into mortgage-backed securities (MBS) that can be sold. However, the difference between the two loan programs is that Freddie Mac purchases home mortgages mostly from smaller banks and savings and loans, while Fannie Mae sources the mortgages from larger, commercial banks.
Freddie Mac Loan Requirements
Just like any other mortgage loan, Freddie Mac has several qualification requirements:
- The size of the home loan (varies by state).
- A minimum credit score of usually 620.
- Down payment requirement (usually as low as 3%).
- Private mortgage insurance (required with less than 20% down).
- Debt-to-income ratios (usually up to 43% is allowed).
Freddie Mac Programs
Freddie Mac has many programs available to make homeownership possible for those on the housing market.
HomeOne Mortgage is a low-down-payment option that serves the needs of many first-time homebuyers and no cash-out refinance borrowers. For a low down payment of 3%, HomeOne mortgage allows first-time homebuyers to reach their goal of homeownership.
Home Possible Mortgage
The Home Possible mortgage offers more options and credit flexibilities to help low-come borrowers with homeownership. To qualify for the Home Possible mortgage, the income of all household members cannot be more than 80% of the area’s median income.
With a low down payment of only 3%, flexible down payment options, and lower fees, the Home Possible mortgage offers many advantages to its borrowers.
Cash-out Refinance Mortgage
The cash-out refinance mortgage option replaces the borrower’s current mortgage with a new mortgage, usually with a lower interest rate or a shorter term. In addition, cash-out refinancing allows borrowers to take advantage of the equity built up and access the difference between the two mortgages in cash.
Whether borrowers want to use the cash for home renovations or consolidate other debts, the cash-out refinance mortgage benefits borrowers who quickly need a lump sum of money.
Refi Possible Mortgage
The refi possible mortgage gives borrowers the ability to take advantage of the current low-interest-rate market by refinancing their mortgage and lowering their monthly payments. The refi possible mortgage helps borrowers achieve financial stability.
A Refi Possible mortgage is for low-moderate income borrowers who believe they might not qualify for refinancing due to their incomes.
How Does Freddie Mac Affect the Mortgage Market?
Freddie Mac positively impacts the real estate mortgage market. Without Freddie Mac, small banks and savings and loans would have to hold mortgage loans in-house, resulting in an increase in interest rates and the total cost of homeownership.
Freddie Mac creates stability to the overall mortgage market, making homeownership possible.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.