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Fannie Mae and Freddie Mac: What You Need to Know

Updated on:
Content was accurate at the time of publication.

Fannie Mae and Freddie Mac are “government-sponsored entities” (GSEs), which means they’re private companies created by the U.S. Congress to help keep the mortgage lending industry running smoothly. They operate under the oversight of the Federal Housing Finance Agency (FHFA), providing cash to lenders so they can fund mortgages to consumers at affordable rates.

Fannie and Freddie set the qualification guidelines used by most conventional mortgages, but they offer different loan programs. We’ll highlight the key differences to help you determine which one is right for you.

Fannie Mae is a nickname for the Federal National Mortgage Association (FNMA), a leading source of home financing for lenders and banks nationwide. Although Fannie Mae doesn’t actually lend money, it buys and sells mortgages from lenders, which allows them to offer low-down-payment loans with up to 30-year repayment terms.

Fannie Mae loan programs

Fannie Mae’s signature programs include the HomeReady® loan, a low-down-payment loan program, as well as the HomeStyle® Renovation loan, for borrowers seeking fixer-upper loans. Fannie Mae also offers specialized programs, like the conventional MH® programs for consumers that need a mortgage for a manufactured home.

 See below for more detail on Fannie Mae loan programs.

Freddie Mac is a nickname for the Federal Home Loan Mortgage Corporation (FHLMC), a shareholder-owned company that, like Fannie Mae, doesn’t lend directly to consumers. However, it does operate loan programs that everyday homebuyers can access through mortgage lenders.

Freddie Mac loan programs

Freddie Mac offers the Home Possible® loan, a 3% down program for low-income borrowers, and a CHOICEHome® mortgage loan option for manufactured homebuyers.

Other programs include the HomeOne® Mortgage, a program with no income limits for first-time buyers, and the CHOICERenovation® program, which is similar to the Fannie HomeStyle renovation program.

 See below for more detail on Freddie Mac loan programs.

Fannie Mae and Freddie Mac help you get a mortgage by providing funds to mortgage lenders and setting guidelines for a wide variety of mortgage loan options, which meet the needs of homebuyers and homeowners.

Below is a brief overview of some of the features that make Fannie Mae and Freddie Mac home loans so popular:

  • Low-down-payment options. Homebuyers only need a 3% to 5% down payment to buy a home, or 3% to 5% equity to refinance a home they already own.
  • Fixed-rate mortgage terms as long as 30 years. A longer term with a fixed rate gives homeowners the security of a steady, predictable mortgage payment.
  • Financing for second homes and investment properties. Most government-backed loans require you to live in any home you buy as your primary residence. Fannie Mae and Freddie Mac provide mortgage programs for homebuyers to purchase and refinance vacation homes and rental properties.
  • Appraisal waiver eligibility. Borrowers with large down payments or homeowners with plenty of equity may be eligible for a property inspection waiver on a purchase or refinance loan. A waiver lets you avoid the expense and hassle of a home appraisal. Government-backed loan programs don’t offer any appraisal waiver options if you’re buying a home.
  • Mortgage insurance flexibility. If you make at least a 20% down payment to buy a home, or have 20% equity and are refinancing your home, Fannie Mae and Freddie Mac loans don’t require private mortgage insurance (PMI).
  • Higher loan limits than FHA loan programs. The conforming loan limit for conventional single-family home financing is $766,550 in most parts of the country, compared to the $498,257 FHA loan limit for one-unit home loans backed by the Federal Housing Administration (FHA).
 See current mortgage rates today.

Below are some of the programs offered by Fannie Mae and Freddie Mac:

Program typeProgram nameSpecial features
Low down paymentFannie HomeReady
  • 3% down payment
  • Boarder income allowed
Freddie Mac Home Possible
  • 3% down payment
  • Sweat equity allowed
RefinanceCash-out refinance
  • Allowed on primary, second homes and investment properties
Rate-and-term refinance
  • Appraisal waiver possible
  • No mortgage insurance with 20% equity
Manufactured home
  • Conventional MH (Fannie Mae)
  • CHOICEHome (Freddie Mac)
  • 3% to 5% down payment
  • Can be used with a wide range of homes from any manufacturer
Renovation
  • HomeStyle Renovation (Fannie Mae)
  • CHOICERenovation (Freddie Mac)
  • Loan is based on home's value after improvements
  • Can borrow higher loan amounts than FHA renovation loan programs

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Looking for detailed Fannie Mae or Freddie Mac loan requirements?

SimilaritiesDifferences
  • Both are government-sponsored enterprises
  • The FHFA oversees them
  • They provide liquidity and affordability to the mortgage market
  • They guarantee mortgages financed by private lenders
  • They purchase and sell mortgages in the secondary mortgage market
  • They offer multiple loan programs, including products for first-time and low-income borrowers
  • Neither enterprise originates loans
  • The government chartered them at different times
  • The minimum requirements for their loan programs aren’t identical:

    • Low-down-payment programs require a 660 minimum credit score with Freddie, but only a 620 with Fannie

    • Manufactured home loans require a minimum 5% down with Freddie, but some borrowers can qualify with only 3% through Fannie

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Fannie Mae and Freddie Mac play a role in nearly 70% of the loans in the U.S. mortgage market.

Fannie Mae and Freddie Mac loans adhere to the conforming loan limits set by the FHFA. In 2024, the loan limit for most one-unit properties is $766,550. In high-cost areas, that maximum loan amount is $1,149,825.

Freddie Mac publishes U.S. mortgage rates in its Primary Mortgage Market Survey (PMMS). This weekly report averages the interest rates from participating lenders on 30-year and 15-year fixed-rate mortgages. The survey reflects market trends and isn’t specific to Freddie Mac mortgage rates.

When the financial crisis of 2007-08 hit, both Fannie Mae and Freddie Mac experienced significant losses in both their guarantee business and holdings in the secondary market. Since the two GSEs were responsible for most of the country’s mortgage loans, there was a great deal of concern about the implications that a bankruptcy would have on the market.

In late 2008, the government placed both companies in federal conservatorship. Today, Fannie Mae and Freddie Mac remain shareholder-sponsored companies under the oversight of the government.

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