Freddie Mac underwriting guidelines are important to you if you're interested in a home loan with a traditional mortgage lender. Many banks sell their loans to this company, which was set up by Congress to help mortgage lenders keep their cash flow open.
The Freddie Mac Underwriting Guidelines
While you can't apply for a loan directly from Freddie Mac, you should know that if you don't fit Freddie Mac requirements, you may have difficulty getting a home loan at the best interest rates. If you do qualify, you can enjoy a pretty competitive rate.
Guidelines can change every year, or possibly more often than that. That being said, it's important to check Freddie Mac's website for updates before you apply for your mortgage loan. As of May 2010, the following guidelines apply:
- Freddie Mac will buy conforming mortgage loans for single family homes of up to $417,000 in value in most states in the U.S. It will buy loans for up to $625,500 if the home is located in the U.S. Virgin Islands, Hawaii, Alaska or Guam.
- Super conforming loans, also called Jumbo loans, can be for amounts between $417,000 and $729,750 or between $625,500 and $1,094,625 in the states and territories mentioned above. Super conforming loans are only available for financing on housing in specific high cost areas of the country where homes tend to be more expensive.
- Loans for one unit primary residences can be up to 95 percent loan to value without secondary financing.
Keep all of this information in mind when you go house shopping since you will have to find a house that fits into the price range while also ensuring that you have enough money for a down payment to satisfy the loan-to-value requirement. What 95 percent means is that you will have to pay for 5 percent of the amount your home sells for out of your own pocket. You cannot finance it completely with your mortgage loan. You may have to pay the rest as points, which are added to your closing costs.
The loans Freddie Mac buys include fixed rate mortgages with terms of 30, 20 or 15 years and adjustable rate mortgages with 5/1, 7/1 and 10/1 terms. Freddie Mac insures primary residences, investment properties and vacation homes, as long as they contain between one and four units of housing. Financing is also available on new construction or properties that are being renovated. FHA mortgages and mortgages through the Department of Veterans Affairs are not eligible for Freddie Mac coverage.
Find out More about Freddie Mac
It's a good idea to talk to a mortgage broker if you're interested in a Freddie Mac loan and want to learn more about Freddie Mac's guidelines. This person should be able to help you further determine whether or not your mortgage will be eligible under the underwriting guidelines. If the mortgage lender eventually plans to sell your mortgage to Freddie Mac, your eligibility will be important. Remember that some lenders will not approve mortgage loans for applicants who are not eligible under Freddie Mac underwriting guidelines while some will accept these applications but not give the best interest rates to these mortgage loans. Another good resource is a real estate agent, since agents tend to work closely with mortgage companies to get ready for the sale and closing.