Home > Uncategorized > Question of the day: What is the difference between Fannie Mae, Freddie Mac and FHA?

Question of the day: What is the difference between Fannie Mae, Freddie Mac and FHA?


Q: What is the difference between Fannie Mae, Freddie Mac and FHA?

A: First, Freddie Mac AND Fannie Mae.  These two entities buy mortgages on the secondary market, pool them, and sell them as a mortgage backed securities to investors on the open market.  The secondary market allows for additional pools of money for future lending.   These “conventional” loan typically requires a higher down payment and higher credit scores to qualify.  They also require monthly mortgage insurance if you do not put a minimum of 20% down payment.   Conventional loans have a MAXIMUM loan amount based on STATE.

Second, FHA.  Federal Housing Administration.  These loans are GOVERNMENT backed loans.  They allow for a lower down payment (3.5%)  with MANDATORY mortgage insurance (this ensures the loan in the event of default) and typically allow for lower credit scores to qualify.  FHA loans also have a MAXIMUM loan limit (lower than Fannie/Freddie loans) based on COUNTY in your state.

Having a dream is good, owning one is better!

Leslie Pelletiere, Owner

First Class Financial Services, proudly mortgage lending since 1999. 

602.294.9288 (o)              602.294.9830 (f)

www.fcfs.net

MB#0902810/ NMLS# 162476

Oh by the way, I am never too busy for your mortgage referral!

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