When you delve into real estate financing, you have likely encountered the terms Freddie Mac and Fannie Mae. These two government-sponsored bodies are massive in the mortgage sector. But when it comes to Freddie Mac vs Fannie Mae, which loan is better for you?
That is what we are going to discuss in this article. We will compare the differences, advantages, and disadvantages of each of them. We will also tell you which of the options would best fit your purposes. An investor or a first-time buyer must know these two to make more informed decisions.
So, let’s dive in!
What Are Freddie Mac and Fannie Mae?
Both Fannie Mae and Freddie Mac are government sponsored enterprises (GSEs). They were developed to facilitate and reduce the costs of mortgages. However, they do not give loans directly.
They instead purchase the mortgages from lenders and transform them into mortgage-backed securities and sell them to investors. This amounts to increased funds that can be used by the banks to lend to new clients.
Although they play more or less the same role, there are certain differences in their functioning as well.
Freddie Mac vs Fannie Mae: Key Differences
1. Freddie Mac vs Fannie Mae: Who They Work With
Freddie Mac mainly works with smaller banks and credit unions. These are often community lenders.
Fannie Mae works more with large commercial banks. So if you’re applying for a loan at a big national bank, it’s likely connected to Fannie Mae.
This difference can affect the interest rate and the loan terms you get.
2. Freddie Mac vs Fannie Mae: Loan Guidelines
Both GSEs follow rules set by the Federal Housing Finance Agency (FHFA). However, their underwriting guidelines differ slightly.
For example:
- Freddie Mac’s Home Possible® program is flexible with down payments. It allows for as little as 3% down and accepts non-borrower household income.
- Fannie Mae’s HomeReady® program also requires only 3% down but may have stricter debt-to-income ratio rules.
Both programs are aimed at low- to moderate-income borrowers, but depending on your income and household setup, one might fit better than the other.
3. Freddie Mac vs Fannie Mae: Credit Score Requirements
Both Freddie Mac and Fannie Mae require a minimum credit score of 620 for most loans. However, Fannie Mae may be more flexible if you have a higher down payment.
In contrast, Freddie Mac sometimes allows alternative forms of credit history. That’s helpful if you don’t have a long credit record.
Freddie Mac vs Fannie Mae: Which Loan Has Better Rates?
The interest rate fluctuates every day and depends on the lender. But when comparing Freddie Mac vs Fannie Mae, rates are usually very similar.
Nevertheless, even little variations in guidelines may give you improved terms in your circumstances. For example, if you are self-employed, Fannie Mae may be ready to make more flexible documentation of the income. However, when you are taking rental income on some sort of property that you own, Freddie Mac is more likely to calculate it more favorably.
Simply put, your lowest rate can typically be determined by what GSE your lender has a preference for and how your finances fit into their policies.
Freddie Mac vs Fannie Mae: Investment Property Loans
If you’re looking to fund an investment property like a fix and flip, RV park, or multifamily real estate deal, Freddie Mac and Fannie Mae both offer attractive options.
- Fannie Mae’s Multifamily loan programs are popular for large rental projects. They offer long-term fixed rates and flexible terms.
- Freddie Mac Multifamily loans are often used for affordable housing and can be easier to qualify for if your property meets certain criteria.
Both offer:
- Competitive rates
- Non-recourse options
- Loan terms from 5 to 30 years
However, if speed and flexibility matter more, you might want to explore private lending options—like Loan Locker, based in Tampa, Florida.
When Should You Choose Freddie Mac?
You might prefer Freddie Mac if:
- You’re working with a local or regional lender
- You want to use the rental income from other properties
- You have non-traditional income sources
- You need help qualifying through flexible guidelines
Freddie Mac is also a strong choice for affordable housing or if you need financing for mobile home parks or land projects.
When Should You Choose Fannie Mae?
You might prefer Fannie Mae if:
- You’re working with a big national bank
- You’re buying a multifamily property
- You want more loan product variety
- You have strong credit and W-2 income
Fannie Mae is a solid option if you want fixed-rate stability and have solid documentation for income and assets.
Freddie Mac vs Fannie Mae: Pros and Cons
| Feature | Freddie Mac | Fannie Mae |
| Lending partners | Local banks, credit unions | Big commercial banks |
| Down payment programs | Home Possible® (3% down) | HomeReady® (3% down) |
| Credit score requirements | 620+ (flexible credit types) | 620+ (stronger with high down payment) |
| Investment property loans | Great for niche and smaller projects | Popular for large multifamily deals |
| Underwriting flexibility | More flexible for unique income | Stricter but broader range of options |
So, Which Loan Is Better?
There’s no one-size-fits-all answer in the Freddie Mac vs Fannie Mae debate. It depends on your personal and financial situation. Here’s a quick way to decide:
- Choose Freddie Mac if you want flexibility, especially with non-traditional income or smaller lenders.
- Choose Fannie Mae if you prefer working with large banks or are applying for a large multifamily loan with strong documentation.
But if neither fits your needs—especially if you need fast, flexible funding for real estate investments—consider working with Loan Locker.
Final Thoughts
When comparing Freddie Mac vs Fannie Mae, both offer solid loan options. However, becoming familiar with their differences can assist you in choosing the one that will suit you.
If your situation doesn’t fit inside the traditional lending box, Loan Locker is here to help. Our team has got decades of experience in the field of property management, construction as well as real estate. We do understand what it requires to close fast and provide you with the funds you require.
So, ready to fund your next project? Apply now with Loan Locker for fast, flexible real estate financing you can trust.