Freddie Mac Loans
Freddie Mac is short for the Federal Home Loan Mortgage Corporation (FHLMC), a government sponsored enterprise (GSE), which was chartered in 1970 to help preserve a fluid and fully functioning market for home mortgage loans. As a GSE, they are a privately held company with implicit backing of the US Government, although they are not technically part of the government itself. Just like Fannie Mae, Freddie Mac buys closed loans from lenders on the secondary market, pools them and then sells them to investors through a securitization as mortgage backed securities (MBS). This process enables Freddie Mac and lenders to reinvest their capital into writing more loans which in turns supports the real estate market.
Looking for Freddie Mac loans? Wondering what is a Freddie Mac loan?
California Mortgage Advisors, Inc. can help, through our wide offerings of Freddie Mac and other government backed loan programs with a wide range of rates, terms and options.
Call us today for your FREE consultation, at (800) 927-6560 to speak with one of our Mortgage Advisors or you can contact us here online.
What Is A Freddie Mac Loan?
As a GSE, Freddie Mac is only allowed to purchase what is known as conforming loans. Freddie Mac sets its own guidelines for the loans it will buy from lenders. Lenders who sell loans to Freddie Mac must carefully follow the guidelines to insure the loan is saleable to Freddie Mac. The number one factor is making sure the loan doesn’t exceed the allowable loan limit. For most areas of the country, the limit is $417,000. However, certain areas are designated as high cost metropolitan regions and have higher loan limits of up to $625,500.
Another factor that is important when applying for a Freddie Mac loan (or a conforming loan) is your debt-to-income ratio (DTI). This is a simple mathematical calculation determined by dividing your total debt payment by monthly income. Total debts include the housing expense (mortgage payment, property taxes and insurance) and other payments such as credit cards, car payments and student loans.
For example, with a monthly debt of $4,000 and monthly income of $10,000, a borrower would have a debt-to-income ratio of 40%. Under current guidelines, Freddie Mac loans will allow up to a 45% ratio, however depending on the strength of the loan file ratios may go higher.
Freddie Mac loan guidelines also require a minimum credit score (FICO score) on the part of the borrower in order to qualify for such a loan. Generally speaking, a FICO score of 720 is considered a good score. The credit score will affect the final rate on the loan, so a borrower with a 780 FICO score will receive a better rate than a borrower with a 620 FICO score.
Required Down Payments:
This is probably the area where potential homeowners seem to have the most misconceptions regarding what is a Freddie Mac loan. The traditional 20% down rule is no longer mandatory, especially with Freddie Mac loan programs. There are new programs which will allow home buyers the chance to obtain loans with as little as 3% down payments. The goal of these low down payment programs is to promote home ownership for qualified borrowers who don’t have the assets to put down 20% or more.
97% Loan-To-Value (LTV) Freddie Mac Home Possible Advantage Program:
If you are looking to refinance or buy a new home with 3% down, here are some of the guidelines for a 97% LTV program:
- Fixed Rate
- No income limit
- Purchase on No Cash Out Refinance
- 1 Unit
- Owner Occupied
- Mortgage Insurance coverage is required
Ready For Your Freddie Mac Loan?
If you are looking to purchase a new home or refinance your existing home, CMA has access to just about every loan program available. Give us a call today at (800) 927-6560 to speak with one of our professional Mortgage Advisors or you can apply here online.