What is the FHLMC Standard?
A Freddie Mac Standard loan is a conventional mortgage product designed to help qualified borrowers secure competitively priced home financing for conforming and super confirming loan limits.
FHLMC Standard – The Basics
- Borrower must receive a benefit in the form of a reduced principal and interest payment, lower interest rate, shorter loan term, or a less risky mortgage product such as when moving from an adjustable rate mortgage to one with a fixed rate
- Conventional mortgage product that fully amortizes (no interest-only or balloon payment)
- Super conforming option available
- 15, 20, 25 and 30 year fully amortizing fixed rate options available
- ARMs not permitted
- 620 minimum FICO; 680 minimum FICO if Lender Purchased Mortgage Insurance (LPMI)
- Eligible transaction types include purchase, no cash-out refinance, cash-out refinance, and Texas Home Equity 50 (a)(6)
- 1-4 unit primary residences permitted
- 1-4 unit investment properties permitted
- 1 unit second homes permitted
- Condominiums/PUDs permitted
- Single-width manufactured housing permitted (cash-out, second homes and investment properties not permitted)
- Multi-width manufactured housing permitted; however, manufactured housing cannot be a super conforming mortgage, or an investment property or a leasehold estate
- Co-ops not permitted
- Maximum LTV 95% for 1-unit primary residence on purchase or no cash-out refinance Follow Freddie Mac guidelines for all additional LTV scenarios.
- AFR does not permit loan with a subject property in Hawaii for all programs in all channels with the exception of Correspondent Delegated UW transactions
What are the benefits?
Competitively Low Rates
Loans owned or guaranteed by Freddie Mac, a government-sponsored enterprise (GSE), can help homeowners save through low interest rates on their mortgage loans.
Super Conforming Option for High-Cost Areas
Freddie Mac’s super conforming mortgages allow larger loan amounts. These higher loan amounts are permissible in designated high-cost areas such as Southern California, Alaska, NYC or the Washington, D.C. area.
With the super conforming option, borrowers in high-cost areas can still get a competitively priced interest rate on a conforming mortgage product and avoid having to get a jumbo mortgage. This also provides a benefit to lenders working with borrowers in higher-priced regions, as it offers an alternative to higher risk jumbo financing.
Flexibility in Terms, Properties & More
The FHLMC Standard product from AFR Wholesale is one of the most versatile lending products on the market. This loan product not only offers a range of fixed rate terms (15, 20, 25 and 30), it is also available for purchase, refinance, cash-out refinance and with the Texas Home Equity 50 (a)(6) cash out refinance option.
This program also offers flexibility when it comes to eligible property types. Whether your borrower’s subject property is a primary residence, second home, or multi-width manufactured home, they can use the FHLMC Standard product to finance their purchase, presuming all other eligibility guidelines are met.
Who is eligible for an FHLMC Standard?
Eligibility for the FHLMC Standard is determined by the borrower’s ability to meet the criteria listed in the basics section above, as well as additional program guidelines.
There are numerous criteria for eligibility; however, two key factors are:
- A minimum qualifying FICO score of 620 is required for all qualifying borrowers.
- A minimum qualifying FICO score of 680 is required for all qualifying borrowers if there is Lender Paid Mortgage Insurance (LPMI).
- Loan limits on the FHLMC Standard product follow Freddie Mac guidelines.
- There is a $1,000,000 maximum loan limit for the FHLMC Super Conforming product.
In which scenarios is the FHLMC Standard loan a good option?
Whether they’re a first-time buyer or repeat buyer, the FHLMC Fully Amortizing Fixed Rate program allows qualified borrowers to obtain competitively priced home financing with flexible underwriting standards.
A few scenarios that could be ideal for FHLMC Standard…
- A borrower purchasing a single-unit primary residence who can’t afford a down payment higher than 5%.
- A borrower interested in purchasing a second home.
- A current homeowner with at least 20% equity who needs cash to help pay off a big expense.
- A borrower purchasing a single-unit home (priced at or below $1,000,000) in a high-cost area.
- A borrower who wishes to refinance their high-cost property and shorten the amortization period in order to pay off their mortgage debt sooner.
- A borrower who wishes to refinance their high-cost property and lengthen the amortization period in order to lower their monthly mortgage payments.
Why was the FHLMC Standard Program Created?
Fully Amortizing Fixed Rate
The FHLMC Fully Amortizing Fixed Rate mortgage program is a flagship program of the Federal Home Loan Mortgage Corporation – a.k.a. Freddie Mac – which is a public government-sponsored enterprise (GSE).
The FHLMC was created in 1970 to expand the secondary mortgage market in the United States. Along with its sister GSE, the Federal National Mortgage Association (Fannie Mae), Freddie Mac buys mortgages on the secondary market, packages them together and sells them as mortgage-backed securities (MBS). The FHLMC Fully Amortizing Fixed Rate loan is a loan that is written to guidelines set by Freddie Mac and is one of the conforming loans Freddie Mac is allowed to buy.
The Super Conforming loan was created by the Economic Stimulus Act of 2008 to allow Freddie Mac and Fannie Mae to purchase mortgages in designated high cost housing markets. The higher limits of the Super Conforming loan are set equal to 115% of local median house prices up to a maximum of $636,150 with higher limits permitted for 2-4 unit homes and homes located in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
Buying a Home with the FHLMC Standard
Buying a home with the FHLMC Standard loan should begin with the borrower getting pre-qualified or pre-approved. From there, the borrower will likely complete the typical steps involved in securing conforming/super conforming home financing. This can include but is not limited to…
- Providing the lender with all necessary documentation to prepare the loan application for approval and underwriting.
- Verification of all income, credit, debt and asset information by the lender.
- Home appraisal.
- Home inspection.
Refinancing is an option under the FHLMC Standard. Qualified borrowers can take advantage of competitive rates on non cash out refinancing, cash out refinancing and the Texas Home Equity 50 (a)(6) cash out refinancing options.
Other Programs to Explore
If the FHLMC Standard product will not meet the needs for a particular scenario, consider one of the following options:
- FHA 203(b) Standard for borrowers with less than 5% to put down and less-than-perfect credit.
- Fannie Mae HomeReady™, designed to help low- to moderate-income borrowers achieve homeownership for as little as 3% down.
- FHLMC Home Possible®, to meet the needs of low- and moderate-income borrowers by providing up to 95% financing.