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Conforming loans are often time referred
to as conventional loans. Conforming loans are ones that
are under $417,000 and meet Fannie Mae and Freddie Mac
underwriting guidelines. By qualifying for a conforming
loan you will be able to obtain some of the best
interest rates possible. Conforming loans are a good
option for most consumers.
Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). These agencies generally purchase first mortgages up to loan amounts mandated by Congressional directive The $57,350 increase in conventional loan limits comes at an opportune time, as the interest rates have been creeping up since last August. A 30 year conforming loan at 6.25% versus a non-conforming (jumbo) loan at 6.75% would increase the monthly payment by $138. These loans offer the best rates for borrowers. You do not need perfect credit to qualify and they also will take very high debt to income ratios, sometimes as high as 65%.
Another factor of conforming loans is a persons credit history. Government Sponsored Entities such as FNMA have credit history standards for credit depth, timely payments, trade line diversification, and risk scores. With the use of automated underwriting, many loans that might not have been approved as a traditional conforming loan, can be approved as a conforming (A paper) loan with the assistance of compensating factors such as: low debt to income ratio's, low loan to value, low mortgage terms (10 year, 15 year, 20 year), and/or lots of verifiable liquid assets (checking, savings, mutual funds, 401k's, etc...). Any combination of these compensating factors may be what it takes to give your loan that little extra something to qualify you for that conforming rate you desire. An experienced mortgage broker will generally have the knowledge and resources to provide you with the best opportunities and automated underwriting engines available to qualify you for a conforming loan and get you the best mortgage rates available. Conforming loans are typically what brokers refer to as A paper loans for A borrowers. Conforming loan amount limits may change from year to year. As of 2006 the conforming loan amount limit is $417,000.00 anything over that amount is usually considered a jumbo loan. Besides setting the Conforming Loan Limits, Fannie Mae (FNMA) and Freddie Mac (FHLMC) also limits the type of homes used as collaterals for Conforming Loans. For a loan to be Conforming (eligible for delivery to Fannie Mae and Freddie Mac), the property used to secure the mortgage has to be a Single Family Residence, 2 family, 3 family, 4 family residence, condominium, cooperative, or Planned Unit Development. Loans that are secured by Mixed-use (residential homes with a commercial unit) and properties with more than four units are considered Non-conforming. Conforming loans are the lowest available interest rates for home financing. Mortgages of $650,000 or more are considered super jumbo mortgages. While jumbo mortgages are only slightly more difficult to obtain than conforming mortgages, there are very few lenders and sources of funding for super jumbo mortgages. Working with a company specialized in super jumbo mortgage financing ensures that your high value refinance or purchase mortgage transaction will have a positive outcome. Single-Family Mortgage Conforming Loan Limits effective January 1, 2006:
First mortgages
•One-family loans: $417,000
•Two-family loans: $533,850
•Three-family loans: $645,300
•Four-family loans: $801,950
One- to four- family mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands are 50 percent higher than the conforming limits for the rest of the country. Conforming limits for second mortgages
•$208,500
•In Alaska, Hawaii, Guam, and the U.S. Virgin Islands: $312,750
Loan amounts higher than conforming loan limits are considered jumbo loans. Conforming loans are easier to sell to investors.
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Information listed above is to be used for educational purposes only and is not guaranteed
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