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Navigating the Maze: Fannie Mae, Freddie Mac, and Your December Mortgage Rates

Updated: Feb 2

Happy New Year and welcome to one of our new blog series! Every month, we will highlight the previous month’s mortgage rates, along with a new home loan product or transaction type. The goal with this series is to help educate individuals on the various loans Essex offers as well as the basic requirements to qualify for each loan. 

Freddie Mac and Fannie Mae logos.

Freddie Mac & Fannie Mae

Let’s begin with the basics, Freddie Mac (FHLMC) and Fannie Mae (FNMA). FHLMC and FNMA are two institutions created by the US congress, one in 1938 and the other in 1970. They are both federally backed institutions that offer access to funds and guarantees to many mortgage companies and banks. The primary goal of these institutions is to provide the US housing market with affordability, stability and liquidity. Despite their similarities, there are also notable differences as well. 

One of the key differences between Freddie Mac and Fannie Mae is rooted in the lenders they purchase mortgages from. Fannie Mae acquires their mortgages from much larger commercial banks, whereas Freddie Mac obtains them from much smaller banks. In addition, each company has its own distinct requirements, such as minimum down payments, FICO score and more when it comes to qualifying for a home loan.

Freddie Mac provides a range of different programs such as HomePossible, RefiPossible and more. Each program has different requirements. For example, a Freddie Mac HomePossible loan (as of 12/18/23) requires a maximum LTV of 97%, minimum FICO of 660 and a maximum DTI of ≤ 45% (although these limits may vary based on individual circumstances). On the other hand, Fannie Mae offers HomeReady, RefiNow, High Balance loans and other programs. For a Fannie Mae HomeReady loan (as of 12/18/23), the maximum LTV is 97% and the minimum FICO is 620 (although these limits may vary based on individual circumstances).

Knowing what Freddie Mac and Fannie Mae are gives individuals more opportunity to access lower interest rates, more financing options, increased confidence in the mortgage market, as well as access to affordable housing. Essex provides many programs within the Freddie Mac and Fannie Mae portfolios and one of our licensed Loan Officers can provide more information that suits your current situation.

December Mortgage Rates 

December Mortgage Rates graphic with a hand placing percentage blocks on an upward trending arrow.

With the new year in full swing, it’s important to keep an eye on last month's mortgage rates to understand how they got to where they are today. On December 27th we ended at 7.01% for a 30 year fixed, 6.41% for a 15 year fixed rate, and 5.96% for a ⅚ adjustable mortgage rate. 

These rates still look pretty high, but December was a good month for mortgage rates as we’ve seen a downward trend throughout the month. At the beginning of the month, a 30 year fixed rate was at 7.69%. This represents a decrease of almost 70 basis points all in under a month! Now there are several factors that are contributing to the downward trend in mortgage rates:

  1. The Federal Reserve decided to hold interest rates where they currently are which has created some stability in the financial markets. 

  2. Positive economic outlook: If you’ve been reading some of the market updates, you’ve probably heard of the term  “soft landing.” Recent data says that the U.S. is heading towards a soft landing, avoiding a recession. This data has helped alleviate concerns about interest rate hikes and inflation.

  3. The holiday season tends to see a slowdown in the housing market, which helps interest rates also see a downward trend. 

What does this mean for you?

If you’re looking to buy a home or refinance your current mortgage, December could be a great time to get a lower rate. With the current rates showing a downward trend, it’s worth looking around at potential homes to see if you can get a better deal. One thing to remember is individual rates will vary. Rates also depend on your credit score, loan amount and more. Make sure to stay on top of mortgage rates so you can get the best deal for your dream home! If you're interested in learning more about your options, contact one of our Loan Officers.

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