The conforming loan, which is the most popular option for borrowers when buying a home, is the one that they turn to. These loans conform to the guidelines of Fannie Mae or Freddie Mac, the government housing agencies.
Conforming loans have more standardized pricing and eligibility criteria. A conforming loan may offer a lower interest rate and longer loan terms than a non-conforming loan.
What are Non-Conforming Loans and How Can They Help?
These loans are sometimes called “jumbo loans”. These loans are not covered by Freddie Mac and Fannie Mae, so they cannot be backed by government agencies. They are more risky for the lender or Beverly Hills Mortgage Broker.
Non-conforming loans exceed the loan limits for conforming loans. The loan limit may vary depending on the location and can change each year. Mainly due to the high cost of the market, there are higher limits in high-demand markets like Alaska and Washington D.C. dThese loans require a minimum 20% downpayment, stricter credit criteria, higher income requirements and a higher interest rates.
Benefits of a Conforming loan
Theirs a handful of benefits that come from conforming loans. Conforming loans offer many benefits. They tend to have a lower interest rate that their counterparts. Monthly mortgage and interest payments are lower over the loan’s life.
Additionally, conforming loans are less risky than conforming loans because government agencies like Freddie, Fannie and Veteran’s Affairs will support the loans in the event of default.
Most Beverly Hills Mortgage Brokers might be more accommodating to income and debt-to–income ratio. A conforming loan may also offer more flexibility in terms of your credit score. In most cases, your down payment will be less than 20%.
Conditions for Conforming Loans
To be eligible for a conforming loan you will need to meet certain requirements. These may vary from lender to lender. You will be eligible for a conforming loans if you meet certain criteria. These are:
Credit score The higher your credit score the greater chance you will be approved for conforming loans. This could lower your down payment requirement for the loan type you’re applying.
Loan to-value ratio This is the amount you want to borrow against the purchase price of your home. If your loan-to value ratio is 80 percent, then you can only borrow 80 percent of the home’s value.
Cash reserves The type of loan will determine the amount of cash assets you need to have in reserve. You may need at least six months of reserve in certain cases.
The Debt to Income ratio is the ratio of your monthly total debt payments against your before tax income. This is your debt-to–income. This monthly payment will also include your mortgage payment.
The number of units – There are many requirements for single-family, multi-unit and four-unit properties.