Freddie Mac Credit Smart® Study Guide (2025/2026 Syllabus)
Module 1: Getting Started - The Path to Homeownership
1. What is the primary mission of Freddie Mac?
ANSWER ✓ Freddie Mac's mission is to make homeownership possible for more
families by providing liquidity, stability, and affordability to the U.S. housing market. It
does this by purchasing mortgages from lenders, which provides those lenders with
money to make more loans.
2. What does it mean that Freddie Mac is a "government-sponsored enterprise"
(GSE)?
ANSWER ✓ It means Freddie Mac was chartered by Congress to support the housing
finance system but is a publicly traded company owned by shareholders. It operates
privately but with a public mission.
3. What is the fundamental difference between renting and owning a home?
ANSWER ✓ Renting provides a place to live with no building of equity; it is a short-term
expense. Owning a home is a long-term investment that can build equity and wealth
over time.
4. What are the two main types of mortgage loans?
ANSWER ✓ Fixed-rate mortgages and adjustable-rate mortgages (ARMs).
5. What is a key advantage of a fixed-rate mortgage?
ANSWER ✓ The interest rate and monthly principal and interest payment remain the
same for the entire life of the loan, providing stability and predictability for budgeting.
6. What is a key feature of an adjustable-rate mortgage (ARM)?
ANSWER ✓ The interest rate can change periodically based on market conditions, which
means your monthly payment could go up or down after an initial fixed period.
, 7. What is a "hybrid" ARM?
ANSWER ✓ An ARM that has an initial fixed interest rate period (e.g., 5, 7, or 10 years)
after which it adjusts annually for the remainder of the loan term.
8. What are the four key steps in the homebuying process?
ANSWER ✓ 1) Getting Ready (checking credit, saving for down payment), 2) Getting
Help (finding a realtor and lender), 3) Finding a Home (searching and making an offer),
and 4) Closing the Deal (finalizing the loan and ownership).
9. What is a mortgage lender?
ANSWER ✓ A financial institution (like a bank or credit union) that provides the funds
you borrow to buy a home.
10. What is a mortgage servicer?
ANSWER ✓ The company you send your monthly mortgage payment to. They handle
customer service, statements, escrow accounts, and may be different from the original
lender.
11. What is a down payment?
ANSWER ✓ The portion of the home's purchase price that you pay upfront yourself, not
borrowed with the mortgage.
12. What is the typical minimum down payment percentage for a conventional
loan?
ANSWER ✓ As low as 3% for qualified buyers.
13. What is Private Mortgage Insurance (PMI)?
ANSWER ✓ Insurance that protects the lender if a borrower stops paying on a loan with
a down payment of less than 20%. The borrower pays the premium.
14. How can you typically remove PMI from your monthly payment?
ANSWER ✓ Once you reach at least 20% equity in your home based on the original
Module 1: Getting Started - The Path to Homeownership
1. What is the primary mission of Freddie Mac?
ANSWER ✓ Freddie Mac's mission is to make homeownership possible for more
families by providing liquidity, stability, and affordability to the U.S. housing market. It
does this by purchasing mortgages from lenders, which provides those lenders with
money to make more loans.
2. What does it mean that Freddie Mac is a "government-sponsored enterprise"
(GSE)?
ANSWER ✓ It means Freddie Mac was chartered by Congress to support the housing
finance system but is a publicly traded company owned by shareholders. It operates
privately but with a public mission.
3. What is the fundamental difference between renting and owning a home?
ANSWER ✓ Renting provides a place to live with no building of equity; it is a short-term
expense. Owning a home is a long-term investment that can build equity and wealth
over time.
4. What are the two main types of mortgage loans?
ANSWER ✓ Fixed-rate mortgages and adjustable-rate mortgages (ARMs).
5. What is a key advantage of a fixed-rate mortgage?
ANSWER ✓ The interest rate and monthly principal and interest payment remain the
same for the entire life of the loan, providing stability and predictability for budgeting.
6. What is a key feature of an adjustable-rate mortgage (ARM)?
ANSWER ✓ The interest rate can change periodically based on market conditions, which
means your monthly payment could go up or down after an initial fixed period.
, 7. What is a "hybrid" ARM?
ANSWER ✓ An ARM that has an initial fixed interest rate period (e.g., 5, 7, or 10 years)
after which it adjusts annually for the remainder of the loan term.
8. What are the four key steps in the homebuying process?
ANSWER ✓ 1) Getting Ready (checking credit, saving for down payment), 2) Getting
Help (finding a realtor and lender), 3) Finding a Home (searching and making an offer),
and 4) Closing the Deal (finalizing the loan and ownership).
9. What is a mortgage lender?
ANSWER ✓ A financial institution (like a bank or credit union) that provides the funds
you borrow to buy a home.
10. What is a mortgage servicer?
ANSWER ✓ The company you send your monthly mortgage payment to. They handle
customer service, statements, escrow accounts, and may be different from the original
lender.
11. What is a down payment?
ANSWER ✓ The portion of the home's purchase price that you pay upfront yourself, not
borrowed with the mortgage.
12. What is the typical minimum down payment percentage for a conventional
loan?
ANSWER ✓ As low as 3% for qualified buyers.
13. What is Private Mortgage Insurance (PMI)?
ANSWER ✓ Insurance that protects the lender if a borrower stops paying on a loan with
a down payment of less than 20%. The borrower pays the premium.
14. How can you typically remove PMI from your monthly payment?
ANSWER ✓ Once you reach at least 20% equity in your home based on the original
