What Is the Federal Home Loan Mortgage Corporation (FHLMC)?

What is a Freddie Mac Loan?

When you need to borrow money to purchase a property, there are numerous types of mortgages to consider. You can opt for a conventional mortgage, an FHA loan with down payment requirements as low as 3.5%, a USDA loan for a rural dwelling or a VA loan for active duty military, veterans and eligible spouses. Some types of home loans can be tailored even further. For example, you may be able to choose your own repayment term or decide whether you want a fixed interest rate or a variable rate.

For the most part, Freddie Mac loans (and Fannie Mae loans, for that matter) are conforming loans that meet specific requirements, including coming in below conforming loan limits that cap the amount homeowners can borrow. Other requirements to be purchased by Freddie Mac or Fannie Mae include meeting certain credit score and down payment thresholds.

Conventional home loans that meet the standards of these agencies go to individuals with a credit score of at least 620, a debt-to-income ratio within acceptable limits (45% to 50% at most)  and a down payment of at least 3%. Buyers who put down at least 20% of the purchase price of a home can avoid paying private mortgage insurance (PMI).

Because government-backed mortgages (FHA loans, VA loans and USDA loans) meet standards set by their respective government agencies, they are typically considered nonconforming. Conventional mortgages are typically considered conforming, whereas jumbo loans in amounts that exceed conforming loan limits are not.

History of Freddie Mac

While Freddie Mac is not a government agency, it was chartered by Congress in 1970 with the goal of supporting the U.S. mortgage market. It is regulated by the Federal Housing Finance Agency (FHFA).

When mortgage lenders sell their home loans to Freddie Mac, this frees up additional funds they can lend to homebuyers. This helps ensure availability of mortgage funds within the U.S. system, increasing the prospects for Americans who want to purchase a home.

Or, as the FHFA puts it, Freddie Mac's actions help "ensure that individuals and families that buy homes and investors that purchase apartment buildings and other multifamily dwellings have a continuous, stable supply of mortgage money."

Freddie Mac vs. Fannie Mae

According to licensed real estate broker Chris McGuire, who also runs a website called Real Estate Exam Ninja, Freddie Mac operates similarly to Fannie Mae. "Both Freddie Mac and Fannie Mae play a crucial role in the mortgage industry, promoting homeownership by making funds available to lenders," he said.

However, McGuire pointed out a few key differences between the two entities. Firstly, Freddie Mac tends to have a slightly different set of underwriting guidelines compared to Fannie Mae, he said.

Beyond that, Fannie Mae purchases more loans from larger commercial banks and lenders, whereas Freddie Mac purchases loans from smaller financial institutions. Fannie Mae has also been around considerably longer than Freddie Mac. In fact, the original GSE was chartered by the U.S. government in 1938.

Freddie Mac’s role in the mortgage market

Fannie Mae and Freddie Mac support approximately 70% of home loans that make it to the secondary market, per data from the National Association of Realtors (NAR). This means these entities ultimately purchase or back around seven in 10 mortgages that originated in the United States, thus helping to free up more cash for institutions to lend to potential homeowners.

Impact on borrowers

Freddie Mac plays a central role in keeping mortgage credit widely available and affordable. Rather than lending directly to consumers, Freddie Mac buys qualifying home loans from lenders and packages them into mortgage-backed securities sold to investors. This process helps replenish lenders’ funds, allowing them to issue more loans. By setting standardized guidelines for the loans it purchases, Freddie Mac also influences who qualifies for a mortgage and under what terms. These standards help promote consistent underwriting and competitive interest rates, particularly for conventional loans. As a result, borrowers often benefit from greater access to financing and more predictable loan options.

Impact on lenders

For lenders, Freddie Mac provides liquidity, risk management and operational consistency. By selling loans to Freddie Mac, lenders reduce the risk of holding long-term mortgages on their balance sheets and free up capital to make new loans. This system lowers funding pressure and supports steady lending even during economic uncertainty. Freddie Mac’s standardized requirements also simplify underwriting and pricing, helping lenders manage risk more effectively. While lenders must follow specific guidelines to sell loans, the tradeoff is increased stability, efficiency and access to a broader secondary mortgage market.

Bottom line

The terms FHLMC and Freddie Mac may be interchangeable, but most people refer to this enterprise with the latter term. Even then, it's easy to get Freddie Mac confused with Fannie Mae since they both perform similar functions in their role as GSE.

Either way, a Freddie Mac mortgage may be right for you, depending on your needs. If you're in search of the perfect home loan, the perfect home or both, your best bet is speaking with one of the best mortgage lenders to find out which type of loan makes sense for you.