As a general rule, most home loans do not exceed 95% of the appraised value or sales price of the home, whichever is lower. Exceptions include government–backed loans, such as Federal Housing Administration(FHA) and Veterans Administration(VA) loans.

If you are buying a new home, you may be able to receive a FHA loan, which often have lower interest rates than conventional, non-government-backed loans. VA loans are available to active and retired U.S. personnel, and like FHA loans, often offer better terms than conventional loans. Check your eligibility and apply for FHA or VA loan quotes, free online!

The FHA is an agency of the federal government that insures mortgage loans. A FHA loan is insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA's regulations. Government-backed loans are made by approved institutions and mortgage companies and insured by the federal government. Generally, FHA loans have a 25-to 30-year payment period, in which the principal and interest are paid in full by a series of equal or nearly equal periodic payments. Discount points are fees charged by the lender when making a FHA or VA loan. One discount point is equal to one percent of the loan amount. To receive a FHA mortgage you can apply for quotes online, from approved institutions and mortgage companies, insured by the federal government.

Fannie Mae (FNMA) is a quasi-governmental agency that is organized like a privately owned corporation. FNMA issues its own common stock and provides a secondary market for mortgage loans. FNMA deals in conventional and FHA and VA loans. FNMA buys a block or pool of mortgages from a lender in exchange for mortgage-backed securities. FNMA guarantees payment of all interest and principal to the holder of the securities.

Conventional loans are loans not backed up by the U.S. government. Conventional loans are usually written conforming to Fannie Mae–Freddie Mac (FNMA–FHLMC) practices and limitations, and often referred to as “conforming loans.” These loans are made by institutions and mortgage companies with the expectation of selling the loans to either FNMA or FHLMC Non-conforming loans also may be written without conforming to the specifications and limitations of FNMA–FHLMC.

The Government National Mortgage Association (GNMA) administers special-assistance programs and works with FNMA in secondary-market activities. The GNMA, commonly called Ginnie Mae, is a government-owned corporation created by the Department of Housing and Urban Development Act of 1968. GNMA participates directly in mortgage finance as a guarantor of pool securities, and through management of loans under special subsidy programs and the tandem plan. Unlike FNMA, GNMA is entirely a governmental agency, a division of the Department of Housing and Urban Development (HUD). Unlike FNMA, GNMA is organized as a corporation without capital stock.

In times of tight money and high-interest rates, Fannie Mae and Ginnie Mae can join forces through their tandem plan. This plan provides that FNMA can purchase high-risk, low-yield (usually FHA) loans at full-market rates, with GNMA guaranteeing payment and absorbing the difference between the low-yield and current market prices. Ginnie Mae also guarantees investment securities issued by private offers (such as banks, mortgage companies and savings and loan associations) and backed by pools of FHA and VA mortgage loans. The Ginnie Mae pass-through certificate is a security interest in a pool of mortgages that provides for a monthly pass-through of principal and interest payments directly to the certificate holder. Such certificates are guaranteed by Ginnie Mae.

The Federal Home Loan Mortgage Corporation (FHLMC) or “Freddie Mac” was created by the Emergency Home Finance Act of 1970. FHLMC is owned by the 12 Federal Home Loan Banks to establish their own secondary-mortgage market. It is the newest of the three government-related agencies. Freddie Mac is another quasi–public entity which transforms pools of conventional mortgages to securities. Because Ginnie Mae included only FHA and DVA mortgages in its securities, there was a need to develop a mortgage-backed security for conventional loans. In 1971, the Federal Home Loan Mortgage Corporation introduced the first security backed by conventional loans.

Freddie Mac is a subsidiary of the Office of Thrift Supervision (OTS), which supervises the federally chartered thrifts. Freddie Mac buys conventional loans from lenders such as savings banks, commercial banks, and mortgage companies. It then assembles a pool of mortgages and issues a security backed by the mortgages. The security is called a Participating Certificate, or Guaranteed Mortgage Certificate. The agency guarantees the full payment of principal and the timely payment of interest. The security is later sold to investors in the capital markets. For the guarantee, Freddie Mac receives a monthly fee paid by the investors.