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Freddie Mac

Created in 1970, Freddie Mac is a stockholder-owned (listed as FRE) government-sponsored agency with a mandate to keep mortgage lenders supplied with money. This is done with the goal of helping middle income Americans obtain home ownership and affordable rental units.

Freddie Mac assists America’s families by:

  • Reducing the cost of financing a home
  • Making mortgage money easier to acquire
  • Educating the public on home ownership issues as well as other financial matters
  • Helping to build strong neighborhoods in the communities they are involved in

Since its creation Freddie Mac has financed over 50 million homes.

How Does It Work?

Freddie Mac doesn’t give individuals mortgages, rather it purchases mortgages from lending institutions and then re-sells them on a secondary mortgage market. The original mortgages are mage by private lending institutions such as banks, credit unions, saving and loan associations and mortgage companies and must conform to industry standards. The industry standards are set by Freddie Mac and Fannie Mae as they are the two largest secondary mortgage lenders in the country. To conform to industry standards the maximum amount of a mortgage in 2006 was $417,000 for most of the United States. The maximum mortgage allowed is adjusted annually to accommodate changes in market conditions.

Eligibility Criteria:

Because the mortgage is obtained through an approved loan agency they each have different eligibility requirements. However, it is the norm for a lender to investigate the following before granting a mortgage:

  • Credit history
  • Employment stability
  • Sufficient income (usually less than 36% of your monthly income can be used to service all debt, including the mortgage)
  • The property being purchased
  • The type of loan sought

Also, the borrower:

  • Must be going to use the house for residential use only.
  • Must be a US citizen, a permanent resident alien or a non- permanent resident alien with a two year credit and residency requirement
  • Have a minimum down payment
  • For single family units the mortgage must be less than $417,000 (for most states)

Freddie Mac operates through approved lending agencies it doesn’t lend money directly to borrowers. Any mortgage lender authorized by Freddie Mac to offer mortgages can grant you a mortgage. Depending on the institution you can apply on-line, in person or over the phone whatever method they normally use to accept mortgage applications.