“Freddie Mac” stands for the Federal Home Loan Mortgage Corporation, a U.S. government-sponsored enterprise (GSE) established in 1970. Rather than lending directly to homebuyers, Freddie Mac buys mortgages from banks and other originators, pools those loans, and sells them as mortgage-backed securities (MBS) to investors.
Congress chartered Freddie Mac to increase liquidity, stability and affordability in the mortgage market. By purchasing loans from lenders, Freddie Mac frees up capital, enabling banks to make more home loans. Over the decades, it has played a central role in supporting single-family and multifamily financing nationwide.
Lenders originate a mortgage and hold it briefly, then sell it to Freddie Mac. That immediate sale replenishes lender capital, allowing them to fund additional mortgages without delay.
After acquiring individual loans, Freddie Mac pools them into MBS. Investors buy these securities, providing Freddie Mac with funds to purchase more mortgages. MBS offer diversification and steady income via principal and interest payments.
Freddie Mac guarantees timely payments to MBS investors, even if borrowers default. This guarantee fee covers credit risk and helps maintain stable mortgage rates. Risk management practices and capital reserves underpin Freddie Mac’s ability to honor those guarantees.
A conforming loan meets Freddie Mac’s size and underwriting requirements. Loan limits vary by county; for 2024, the baseline conforming limit is $726,200 in most areas and higher in high-cost markets.
Freddie Mac generally requires a minimum credit score of 620. Debt-to-income (DTI) ratios should not exceed 45%–50%, though exceptions exist with compensating factors. Income must be verifiable and stable.
Minimum down payments start at 3% for certain programs. Borrowers may need cash reserves equal to two months of principal, interest, taxes and insurance (PITI). Loans with less than 20% down typically require private mortgage insurance (PMI).
Freddie Mac’s Home Possible® and HomeOne® programs offer low-down-payment options and flexible credit guidelines for first-time and repeat buyers. Income and purchase price caps apply, but these programs aim to boost affordability.
Both are GSEs that buy conforming loans and issue MBS. Freddie Mac focuses heavily on smaller lenders and multifamily properties, while Fannie Mae often has broader relationships with large banks and a larger MBS footprint.
FHA and VA loans are government-insured or guaranteed, allowing lower credit scores and down payments. Freddie Mac loans typically have stricter credit standards but may offer lower long-term rates and no upfront mortgage insurance premiums.
Pros: competitive rates, predictable terms, established guidelines. Cons: stricter credit and documentation requirements, PMI on low-down-payment loans. Investors may favor Freddie Mac MBS for liquidity and guarantees.
Freddie Mac charges a guarantee fee (g-fee) for each loan it backs. This fee compensates for credit risk and is built into your interest rate or paid upfront as points.
When you lock your rate with a lender, that commitment often ties to Freddie Mac’s prevailing pricing. Prepayment penalties are rare on conforming loans, giving borrowers flexibility to refinance or pay off early.
Closing costs include origination fees, appraisal, title insurance and Freddie Mac’s g-fee. Paying discount points can lower your rate. To refinance, loans must meet current conforming guidelines and seasoning requirements.
Your lender services the loan and collects payments. Freddie Mac owns the loan or the MBS backing it, but it does not handle day-to-day servicing unless assigned.
Freddie Mac’s servicer follows foreclosure laws in your state. If the loan ends in a loss, Freddie Mac covers investor losses after liquidating the property, thanks to the g-fee structure.
Yes. You can refinance into an FHA, VA or portfolio loan, or choose a non-agency investor’s product if you no longer fit conforming criteria.
Visit Freddie Mac’s website for bedroom calculators, loan limit lookups and program guides. Many lenders also offer Freddie Mac tools on their portals.
Step 1: Rate Shop & Prequalification
Maria compares rates from multiple lenders and gets prequalified based on a 640 credit score.
Step 2: Meeting Freddie Mac’s Credit & Income Guidelines
She documents two years of steady employment and verifies income, keeping DTI at 42%.
Step 3: Locking Rate and Closing with a Conforming Freddie Mac Mortgage
Maria locks a 30-year fixed rate, completes appraisal and underwriting, and closes with 3% down.
Freddie Mac conforming loans suit buyers with moderate to strong credit, stable income and a desire for competitive rates. Special programs also aid lower-income applicants.
Contact multiple lenders to compare Freddie Mac pricing and g-fees. Use Freddie Mac’s online resources for rate calculators, loan limit lookups and program eligibility tools.
