What type of loans does the Federal National Mortgage Association (Fannie Mae) purchase?

The Federal National Mortgage Association, commonly known as Fannie Mae, purchases primarily conforming mortgage loans and those insured by the Federal Housing Administration (FHA). Conforming loans are those that meet specific guidelines set by Fannie Mae, allowing them to be sold in the secondary mortgage market. By purchasing these types of loans, Fannie Mae helps to provide liquidity, stability, and affordability in the housing market.

Conforming loans adhere to certain criteria regarding loan amounts, borrower creditworthiness, and other factors, making them eligible for Fannie Mae’s standards. Additionally, loans insured by the FHA are included because they provide an additional layer of security for Fannie Mae, reducing the risk associated with lending. This ability to purchase both conforming and FHA-insured loans enables Fannie Mae to play a key role in promoting homeownership and supporting the housing finance system.

The other options do not accurately capture the scope of Fannie Mae’s activities in the mortgage market. Government-backed loans include more than just FHA-insured loans and often refer to Veterans Affairs (VA) loans and other government programs, which may not fall under Fannie Mae’s purchasing umbrella. Conventional loans, while they include conforming loans, do not encompass the full range of loans Fannie Mae