Conforming Mortgage Loans
A conforming mortgage, for sake of simplicity, is any loan amount up to $417,000 for a single-family residence that fits guidelines Because these loans adhere to terms and conditions set by Fannie and Freddie, which include credit and income requirements, they are easily sold to investors in bulk on the secondary market because of the perceived lower risk.As a result, mortgages with conforming loan amounts tend to carry lower interest rates than jumbo loans because of their strong demand on the secondary market.
The conforming limit has risen substantially in the last few years as housing prices have skyrocketed in the United States, and now most home loans in metropolitan areas exceed the conforming limit.
Homeowners can avoid exceeding the conforming limit by breaking their loan up into a first and second mortgage. If you keep your first loan at $417,000, you can add a second mortgage behind it without breaking the conforming limit. Keep in mind, however, that second mortgages typically price higher than first mortgages.
A conforming mortgage, for sake of simplicity, is any loan amount up to $417,000 for a single-family residence that fits guidelines Because these loans adhere to terms and conditions set by Fannie and Freddie, which include credit and income requirements, they are easily sold to investors in bulk on the secondary market because of the perceived lower risk.As a result, mortgages with conforming loan amounts tend to carry lower interest rates than jumbo loans because of their strong demand on the secondary market.
The conforming limit has risen substantially in the last few years as housing prices have skyrocketed in the United States, and now most home loans in metropolitan areas exceed the conforming limit.
Homeowners can avoid exceeding the conforming limit by breaking their loan up into a first and second mortgage. If you keep your first loan at $417,000, you can add a second mortgage behind it without breaking the conforming limit. Keep in mind, however, that second mortgages typically price higher than first mortgages.
Here are the conforming loan limits for other residential property types:
Two-unit properties: $533,850
Three-unit properties: $645,300
Four-unit properties: $801,950
Two-unit properties: $533,850
Three-unit properties: $645,300
Four-unit properties: $801,950
High-Cost Conforming Loan Limits
Thanks to recent legislation, the conforming loan limit has risen to as much as $729,750 in some higher-cost areas in the United States until the end of 2008. These types of loans are often referred to as “conforming jumbo loans.”
Thanks to recent legislation, the conforming loan limit has risen to as much as $729,750 in some higher-cost areas in the United States until the end of 2008. These types of loans are often referred to as “conforming jumbo loans.”
However, beginning January 1, 2009, the so-called “high-cost conforming loan limit” will max out at $625,500 in the most expensive areas nationwide.
For two-unit properties, the new limit will be $800,775
For three-unit properties, the new limit will be $967,950
For four-unit properties, the new limit will be $1,202,925
For properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the loan limits are 50 percent higher.
For two-unit properties, the new limit will be $800,775
For three-unit properties, the new limit will be $967,950
For four-unit properties, the new limit will be $1,202,925
For properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the loan limits are 50 percent higher.
Jumbo Mortgage Loans
A “jumbo mortgage” is any single loan amount over the conformaing loan limit, which is currently $417,000 for a one unit property in the United States. Jumbo mortgages are not backed by the FNMA (Fannie Mae) or FHLMC, so outside investors such as banks buy these loans on the secondary market.
Jumbo loan amounts carry greater risk for a number of reasons. Along with larger loan amounts financed and fewer available investors, they also tend to be tied to luxury residences which are known to be harder to sell in a short amount of time, mainly due to the general lack of wealthy, prospective home-buyers. Luxury homes are also more prone to valuation shifts than conventional homes during market shifts.
Because of the associated risks, jumbo mortgage loans carry slightly higher interest rates, although not by much. The difference may be .25% - .50% higher, or borrowers may just lose out on a rebate offered on conventional loan amounts. And now that home prices in many metropolitan areas in the United States are so high, most mortgages end up being jumbo loans anyways, so lenders aren’t stressing the importance of the jumbo limit anymore.
Most lenders offer the same programs for jumbo loans as they do for conventional loans. Borrowers can even find zero-down jumbo mortgages without a problem. Most lenders these days can provide 100% financing on deals up to around $1.5 million.
Keep in mind that there are loan limits on very expensive properties, but usually loan programsare available for all loan amounts, both large and small as long as the LTV/CLTV is within guidelines and not too close to 100% financing.
Jumbo loans are also known as super jumbo loans to excitable brokers and loan officers who think they’ve got a huge deal on their hands and money signs in their eyes. But a true “super jumbo loan” is a loan amount of $650,000 and above.
A “jumbo mortgage” is any single loan amount over the conformaing loan limit, which is currently $417,000 for a one unit property in the United States. Jumbo mortgages are not backed by the FNMA (Fannie Mae) or FHLMC, so outside investors such as banks buy these loans on the secondary market.
Jumbo loan amounts carry greater risk for a number of reasons. Along with larger loan amounts financed and fewer available investors, they also tend to be tied to luxury residences which are known to be harder to sell in a short amount of time, mainly due to the general lack of wealthy, prospective home-buyers. Luxury homes are also more prone to valuation shifts than conventional homes during market shifts.
Because of the associated risks, jumbo mortgage loans carry slightly higher interest rates, although not by much. The difference may be .25% - .50% higher, or borrowers may just lose out on a rebate offered on conventional loan amounts. And now that home prices in many metropolitan areas in the United States are so high, most mortgages end up being jumbo loans anyways, so lenders aren’t stressing the importance of the jumbo limit anymore.
Most lenders offer the same programs for jumbo loans as they do for conventional loans. Borrowers can even find zero-down jumbo mortgages without a problem. Most lenders these days can provide 100% financing on deals up to around $1.5 million.
Keep in mind that there are loan limits on very expensive properties, but usually loan programsare available for all loan amounts, both large and small as long as the LTV/CLTV is within guidelines and not too close to 100% financing.
Jumbo loans are also known as super jumbo loans to excitable brokers and loan officers who think they’ve got a huge deal on their hands and money signs in their eyes. But a true “super jumbo loan” is a loan amount of $650,000 and above.
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