When purchasing a home, a buyer has a lot of options to consider. There are considerations of price, location, size and a host of other tangible aspects about a property that need to be factored into the decision to buy a home. So too does a savvy buyer need to know the difference between the myriad of different home mortgage options that are available to him or her. While Ginnie Mae and Fannie Mae loans sounds familiar in name, there are some key differences that are essential to know.
Ginnie Mae was created to help American families with low or moderate incomes capable of owning a home. Lenders have an incentive to work with Ginnie Mae, to make a profit off these transactions and to use the profit earned to create even more mortgage loans for the American public to take advantage of, because Ginnie Mae offers these lenders a guarantee that they can make a profit off the secondary market mortgage loans they're offering.
Ginnie Mae's ability to guarantee principal and interest payments comes from the fact that they are backed by loans that are either federally insured or guaranteed. These loans are primarily insured by the Federal Housing Administration, also known as the FHA, or the Department of Veterans Affairs, or VA, guarantees them. Other insurers or guarantors of loans include the Rural Housing Service (RHS) in the Department of Agriculture and the Office of Public and Indian Housing (PIH) in the Department of Housing and Urban Development.
On the other hand, Fannie Mae is considered a GSE: a government-sponsored enterprise. Its mission is to provide the United States housing and mortgage markets with liquidity, stability and affordability, having been chartered by Congress. Instead of dealing with home buyer directly, Fannie Mae instead works with bankers, brokers and others in the primary mortgage market to make sure funds are available to lend at affordable rates to home buyers, because it also operates in the secondary mortgage market. The issuance of debt securities in both the domestic and international capital markets are who Fannie Mae's mortgage investments are funded by.
That about sums up the primary differences between Ginnie Mae and Fannie Mae loans. It is still vitally important to understand how each different lender works in order to ensure a successful real estate transaction, even if the end result may still be the same for you as the purchaser of a new home.
Ginnie Mae was created to help American families with low or moderate incomes capable of owning a home. Lenders have an incentive to work with Ginnie Mae, to make a profit off these transactions and to use the profit earned to create even more mortgage loans for the American public to take advantage of, because Ginnie Mae offers these lenders a guarantee that they can make a profit off the secondary market mortgage loans they're offering.
Ginnie Mae's ability to guarantee principal and interest payments comes from the fact that they are backed by loans that are either federally insured or guaranteed. These loans are primarily insured by the Federal Housing Administration, also known as the FHA, or the Department of Veterans Affairs, or VA, guarantees them. Other insurers or guarantors of loans include the Rural Housing Service (RHS) in the Department of Agriculture and the Office of Public and Indian Housing (PIH) in the Department of Housing and Urban Development.
On the other hand, Fannie Mae is considered a GSE: a government-sponsored enterprise. Its mission is to provide the United States housing and mortgage markets with liquidity, stability and affordability, having been chartered by Congress. Instead of dealing with home buyer directly, Fannie Mae instead works with bankers, brokers and others in the primary mortgage market to make sure funds are available to lend at affordable rates to home buyers, because it also operates in the secondary mortgage market. The issuance of debt securities in both the domestic and international capital markets are who Fannie Mae's mortgage investments are funded by.
That about sums up the primary differences between Ginnie Mae and Fannie Mae loans. It is still vitally important to understand how each different lender works in order to ensure a successful real estate transaction, even if the end result may still be the same for you as the purchaser of a new home.
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