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Differences between Freddie Mac and Fannie Mae
In mortgage industry, you are most likely to encounter these two common companies, Fannie Mae and Freddie Mac. Since those companies to not directly extend loans to users, people are inclined to neglect considering their importance. 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. These companies do play a big role in enabling banks to extend mortgage loans. Over 30 years term period for loans can be realized through such companies. By buying those mortgage loans in the market, those companies support banks to keep them running their businesses in the industry. Those two companies were formed under government to ease with difficulties experienced in mortgage industry. The following are some of the distinct differences between the two companies despite their first impression similarities.
Fannie Mae was founded by the United States Government in 1938 with its main purpose being to help people irrespective of the backgrounds to get a home to live in. Both the low and high income earners benefited from the company. Fannie Mae begun by purchase mortgage loans that were protected under insurance policy by the government. Market rivalry is good in altering prices, Freddie Mac was formed in 1970 to create that competitive environment. After its formulation, Fannie Mae was allowed to buy even those unprotected loans.
Their scale of operations greatly vary, Fannie Mae deals with big commercial institutions like the Bank of America or Chase Bank while Freddie Mac deals with young institutions with smaller worth and ordinarily called the thrift banks. Credit score for those wishing to deal with Fannie Mae should be high with no past poor records. People with poor credit score, on the other hand, have a better chance with Freddie Mac.
Basing on different conditions, both companies charge different down payment. Interest rate can be fixed or varied, this strongly form the basis for down payment calculation for the Fannie Mae. Flexible down payment charged by Freddie Mac varies normally between 3 to 5 percent basing on complete lot of different conditions. Under completely different terms, the installment periods also differ.
To learn more info. about and do a better comparison of the two, click on the Fannie website’s link. 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. If you want to go big and deal with Fannie Mae, you should be having a good credit score and have borrowed from big banks. Interest rates will be regulated by such companies without affecting the banks operations in the industry.