Anonymous
Posted on: 08th Apr, 2004 10:48 pm
conforming loan is a conventional mortgage that is within the maximum loan limit allowed by government sponsored agencies freddie mac and fannie mae. these organizations do not provide the loans; rather they purchase such loans from private lenders and then sell them to investors.
features:
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features:
- conforming loan limits are determined by organizations like freddie mac and fannie mae. however, the maximum limit keeps changing each year.
- freddie mac and fannie mae set up the underwriting guidelines for conforming loans. based on these guidelines, lenders decide upon the maximum loan amount that can be offered to a borrower. these guidelines also help lenders in fixing the credit rating and income level that can help a borrower to qualify for these loans.
- lenders generally consider the debt to income ratio of a borrower. they require that a borrower's monthly mortgage expenses should not exceed 28% of the gross monthly income. the total debt payments (including the mortgage payments and other debt payments like student loan, auto loan etc) should be within 36% of the gross monthly income.
- lenders require a credit score above 620 for approval of these loans. such scores are generally known as fico scores. lenders also check whether the borrower has made late payments towards any previous debt.
- it becomes easier to qualify for such loans when borrowers can make a down payment of 20% of the sales price of the house. lenders often reduce the down payment to 3% of the sales price. in most cases, the amount of loan depends on the down payment and the sales price of the house or the existing loan balance for refinance. there are lenders who offer 100% financing for conforming loans.
- conforming mortgages have interest rates that are slightly lower than that offered by jumbo loans having higher loan limits. often the rates are 0.25% to 0.50% lower than those of jumbo loans.
- these home loans can be fixed as well as adjustable rate mortgages with loan periods of 10, 15, and 25 to 30 years.
- these loans are availed by borrowers with owrefinance do not exceed the conforming loan limit. but while these loans are available at low rates compared to other conventional mortgages, these follow stringent rules as far as their approval is concerned.
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the conforming loan limits for the last 5 years are given below:
the maximum mortgage amount is 50% higher in alaska, hawaii, and virgin islands. properties having five or more units are regarded as commercial properties which follow different rules.
the 2006 limit for a second mortgage loan is $208, 500 but in alaska, hawaii, and virgin islands, the maximum amount of second mortgage being offered is $312,750. the sum of the loan amounts of the first and second mortgages should not exceed $417, 000 (or $625,500 in alaska, hawaii, and virgin islands).
| loan limit for | 2002 | 2003 | 2004 | 2005 | 2006 |
| one unit | $ 300,700 | $ 322,700 | $ 333,700 | $ 359,650 | $ 417,000 |
| two units | $ 384,900 | $ 413,100 | $ 427,150 | $ 460,400 | $ 533,850 |
| three units | $ 465,200 | $ 499,300 | $ 516,300 | $ 556,500 | $ 645,300 |
| four units | $ 578,150 | $ 620,500 | $ 614,650 | $ 691,600 | $ 801,950 |
the maximum mortgage amount is 50% higher in alaska, hawaii, and virgin islands. properties having five or more units are regarded as commercial properties which follow different rules.
the 2006 limit for a second mortgage loan is $208, 500 but in alaska, hawaii, and virgin islands, the maximum amount of second mortgage being offered is $312,750. the sum of the loan amounts of the first and second mortgages should not exceed $417, 000 (or $625,500 in alaska, hawaii, and virgin islands).
