Fannie Mae vs Freddie Mac Guidelines: What Borrowers Need to Know
Short answer
Fannie Mae and Freddie Mac both buy conventional loans, but they do not underwrite identically. A file declined under one can be approved under the other — on self-employment, rental income, gift funds and condo rules in particular.
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When comparing Fannie Mae vs Freddie Mac guidelines, it’s clear that while both agencies serve the conventional mortgage market, they apply their rules differently. For homebuyers and refinancers in 2025, these distinctions can impact loan approval, terms, and eligibility. Let’s break down the most important differences every borrower and real estate professional should understand.
North Star Mortgage Network, Inc. in Jacksonville, Florida runs Florida files through both Desktop Underwriter and Loan Product Advisor, because the same borrower can receive different findings from each agency and the stronger finding is not always predictable in advance. All loans are subject to credit approval.
Maximum LTV and Cash-Out Rules Under Fannie Mae vs Freddie Mac Guidelines
- Fannie Mae allows up to 97% LTV on a one-unit primary residence for fixed-rate loans, while Freddie Mac follows the same limit for single units.
- For investment properties, Fannie Mae caps LTV at 75% across one-to-four units, while Freddie Mac allows 85% LTV for a one-unit property.
- Cash-out refinance rules also diverge: Freddie Mac treats certain divorce buyouts as “Special Purpose” refinances with an 80% max LTV, while Fannie Mae may allow higher flexibility.
Credit Events and Extenuating Circumstances in Fannie Mae vs Freddie Mac Guidelines
- Fannie Mae permits verification of extenuating circumstances to shorten waiting periods after foreclosure, short sale, or deed in lieu.
- Freddie Mac does not accept extenuating circumstances for reduced waiting periods.
- Divorce as a hardship may be recognized under Fannie Mae guidelines but is not acceptable under Freddie Mac.
Student Loans and DTI Ratios in Fannie Mae vs Freddie Mac Guidelines
The rate quote takes no Social Security number and no credit pull. Nathan Young, NMLS #325206 · North Star Mortgage Network, Inc. NMLS #356789 · Jacksonville, FL · Serving Florida since 2000. All loans subject to credit approval.
Student loan treatment is one of the most common differences:
- Fannie Mae may allow flexibility depending on repayment plan type.
- Freddie Mac applies its own method of calculating payments and often requires adjustments when repayment terms are unclear.
- Maximum DTI also varies: Fannie Mae limits no-credit-score borrowers to 40% DTI, while Freddie Mac allows higher DTIs depending on LPA approval.
Income and Asset Verification: Fannie Mae vs Freddie Mac Guidelines
- Fannie Mae requires two months of bank statements for self-employed borrowers using business assets, while Freddie Mac requires three months.
- Credit card reward points are not allowed as funds under Fannie Mae, but Freddie Mac permits them if redeemed for cash.
- Trust and gift funds also differ—Freddie Mac permits estates and trusts of related persons to contribute, while Fannie Mae does not.
Appraisals, Condos, and ADU Rental Income Under Fannie Mae vs Freddie Mac Guidelines
- Detached Condos: Fannie Mae allows desktop appraisals; Freddie Mac requires full appraisals.
- ADUs (Accessory Dwelling Units): Freddie Mac allows rental income from an ADU on a primary residence to count toward qualifying income. Fannie Mae does not.
Why Fannie Mae vs Freddie Mac Guidelines Matter
For borrowers, the distinction between Fannie Mae vs Freddie Mac guidelines can affect everything from down payment requirements to whether certain income sources count. For professionals, knowing these differences ensures you guide clients toward the most favorable outcome.
At North Star Mortgage Network, we carefully evaluate which program works best for each client, making sure no opportunity is left on the table.
Nathan Young is the founder and president of North Star Mortgage Network, Inc., an independent mortgage brokerage in Jacksonville, FL serving all of Florida since 2000. Call or text direct: 904-613-7700. Office: 904-880-6741. Nathan Young NMLS #325206 | North Star Mortgage Network, Inc. NMLS #356789 | nsmn.com
This article is for general education only and is not legal, tax, or financial advice. Agency guidelines may change, and individual lender overlays can be stricter than agency requirements. Available for qualified borrowers; program guidelines apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency. North Star Mortgage Network, Inc. is not affiliated with or acting on behalf of any government agency. All loans subject to credit approval. North Star Mortgage Network, Inc. | NMLS #356789 | Jacksonville, FL | nsmn.com | 904-880-6741
