Freddie Mac – Your Guide to the Federal Home Loan Mortgage

 

Freddie Mac
Freddie Mac

Freddie Mac: Your Guide to the Federal Home Loan Mortgage

If you’re looking to buy a home but don’t have enough cash for a down payment, Freddie Mac may be able to help. Mac is a government-sponsored enterprise that provides mortgage capital to lenders. The organization was created in 1970 to increase access to affordable housing and has helped millions of Americans become homeowners since then. In this guide, we’ll take a closer look at Freddie Mac and how it works.

What is Freddie Mac?

Freddie Mac, short for Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise that purchases mortgages from lenders and packages them into securities that are sold to investors. The money from the sale of these securities is used to purchase more mortgages, which helps keep the housing market liquid and the cost of borrowing low.

In addition to providing liquidity to the housing market, Freddie Mac also offers programs designed to help make homeownership more accessible to people who may not have large down payments or perfect credit scores. Some of the programs offered by Freddie Mac include Home Possible and HomeOne.

Pros and Cons of Freddie Mac

As with any financial product, there are both pros and cons to using Freddie Mac. Here are some of the key advantages and disadvantages to keep in mind:

Pros

  • Lower Down Payment: One of the biggest advantages of Freddie Mac is that it allows borrowers to put down as little as 3% of the home’s purchase price. This can make it easier for people to become homeowners who may not have the savings to make a larger down payment.
  • Fixed Rate Mortgages: Freddie offers fixed-rate mortgages, which means that the interest rate on the loan remains the same for the life of the loan. This can make it easier for borrowers to budget and plan for their future payments.
  • Flexible Credit Requirements: Freddie Mac’s credit requirements are more flexible than those of some other lenders. This can make it easier for people with less-than-perfect credit scores to qualify for a mortgage.

Cons

  • Private Mortgage Insurance (PMI): Borrowers who put down less than 20% of the home’s purchase price are typically required to pay for private mortgage insurance (PMI). This can add hundreds of dollars to the monthly mortgage payment.
  • Limits on Loan Amounts: Mac has limits on the size of the loan that it will purchase. In some areas, these limits may be too low for people who are looking to buy more expensive homes.
  • Strict Documentation Requirements: Freddie Mac has strict documentation requirements, which means that borrowers will need to provide a lot of paperwork to prove their income, assets, and other financial details.

Freddie Mac Helps Americans

Freddie Mac has been instrumental in providing affordable housing options to millions of Americans over the years. According to their statistics, in 2020 alone, they helped over 2.2 million families become homeowners or obtain rental housing. Additionally, over 87% of the mortgages they purchased were for homes owned by low- to moderate-income families. These numbers demonstrate the significant impact that Freddie has had on increasing access to affordable housing and helping Americans achieve their dreams of homeownership.

Conclusion

Freddie Mac can be a great option for people who are looking to become homeowners but don’t have enough cash for a large down payment. The organization’s programs and flexible credit requirements can make it easier for people to qualify for a mortgage. However, borrowers should be aware of the potential drawbacks, such as the requirement for private mortgage insurance and the limits on loan amounts.

If you’re interested in learning more about Freddi Mac and how it can help you become a homeowner, contact a trusted Realtor who can guide you through the process. Realtor Robert Lesher can help you find the perfect home that meets your needs and budget. Contact Bob today at (302) 604-9234, form entry, or email [email protected] to get started.

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