MortgageDepot has years of experience obtaining mortgage loans for borrowers in need of financing to complete the purchase or refinance of residential and commercial properties throughout the country. We pride ourselves on our commitment of providing our borrowers with knowledgeable and trustworthy advice and guidance, including educating them about the workings of the mortgage industry.

How the mortgage markets work

Gone are the days when lenders kept mortgages for the entire life of the loan with borrowers making their monthly payments to the original lender. Today, mortgage loans are sold by lenders in a secondary market dominated by Fannie Mae and Freddie Mac.

The ability to sell loans in a secondary market and recover the money they lent allows banks and other lenders to make more loans. Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgage loans, bundle them, and resell them to investors.

Differences between Fannie Mae and Freddie Mac

Both Fannie Mae and Freddie Mac have guidelines that mortgage lenders must follow to ensure the loan loans they make can be sold. One area in which the two enterprises differ is in the acceptable loan-to-value ratios for the loans being sold in the secondary marketplace.

The LTVs for different properties are as follows:

  • Primary residence: Properties with up to two units can have an LTV up to 85 percent for Fannie Mae and 80 percent for Freddie Mac. Properties with three to four units can have LTVs up to 75 percent for Fannie Mae and up to 80 percent for Freddie Mac.
  • Second homes: Fannie Mae LTVs can be up to 90 percent. Freddie Mac is up to 85 percent.
  • Manufactured homes: Fannie Mae has a maximum LTV of 90 percent while the maximum for Freddie Mac is 85 percent.
  • Investment properties: Only single-unit properties are permitted, and the maximum LTVS are 75 percent for Fannie Mae and 85 percent for Freddie Mac.

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