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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. But these two companies greatly helps banks to continue offering loans as well as keeping the interests on loans low. These companies do play a big role in enabling banks to extend 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. Fannie Mae and Freddie Mac were both formed under government act 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. The company was restricted to buying mortgage which was under protection cover by the government. In 1970, the United States government founded the Freddie Mac company to create a competitive industry. 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.
The two companies ask for down payment but of varied worth basing on their set terms and conditions. Fannie Mae calculate the required down payment basing on the type loan rate whether fixed or variable. Basing on the different terms set by Freddie Mac, their down payment varies between 3 to 5 percent. The installment periods too do differ under completely different terms.
Click on the Fannie website’s link to learn and discover more info for basis of comparison. These two companies will influence your decision while taking a mortgage loans. Such decisions may include choosing which bank to borrow from. For those dealing with big financial institutions, their choice will be Fannie Mae. Involvement of these companies in the mortgage industry will regulate the interests while the banks are not pushed out of the market.

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