A Whole Lot of Maes: Ginnie Mae and Fannie Mae Loans

A buyer has a lot of options to consider when purchasing a home. Along with considerations of price, location and size, there are a host of other tangibles aspects that need to be factored into your choice to actually buy a piece of property. It is also essential to know the difference between all the different mortgage options, as a savvy home buyer. There are some key differences between Ginnie Mae and Fannie Mae loans that are essential to know, even though they sound similar in name.

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.

Fannie Mae, on the other hand, is a government-sponsored enterprise, or GSE. Congress chartered it, and its mission is to provide the United States housing and mortgage markets with liquidity, stability and affordability. Fannie Mae also operates in the secondary mortgage market, so instead of dealing with home buyers directly, it 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. Fannie Mae's mortgage investments are funded by the issuance of debt securities in both the domestic and international capital markets.

You can now see how Ginnie Mae and Fannie Mae loans differ. Even if you see the same result with either loan option, in order to ensure a successful real estate transaction, it is important for you to know the difference between the two mortgage options.

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