If you have the money, now is a good time to make your plays in real estate. Rates are low and expected to go lower, and real estate is historically cheap right now. When putting together your real estate investment package, you are wise to know what type of loan you can qualify for. When doing your research you may find that the banks offer hugely different rates for conforming vs. non-conforming loans(Jumbo). Depending in the state your property is in, the cost ceiling for conforming vs. non-conforming loans may vary. It is best to talk to your banker or mortgage broker about these limits.
But what are conforming vs. non-conforming loans anyway? Let me explain. Simply put:
In the United States, a conforming loan is a mortgage loan that conforms to GSE guidelines.
In general, any loan which does not meet the GSE guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.
Okay, that is to simple an explanation for this site. How about this:
The conventional loans conforming limit is an amount set by Congress and is the maximum loan size eligible for purchase by either Fannie Mae or Freddie Mac, two Federally chartered organizations who purchase the underlying securities from mortgage originators. Those funds are reinvested in new mortgages completing the flow of funds cycle.
The current conforming limit is set at $417,000. (This may be different in some states or geographic areas.) Any loan amount above that amount is considered a Jumbo loan and is often subject to an interest rate pricing premium as well as to some additional underwriting restrictions. A common
strategy to lower overall interest costs if your purchase or refinance balance is above $417,000 is to use a combination of both first and second trust money,
referred to as an 80/10/10 conventional loans, 80/15/5 conventional loans.
80/10/10 means you put a down payment of 10% and the first loan is 80% and the second loan is 10%. With an 80/15/5 the down payment is 5% and the second is 15%, with the same first mortgage loan at 80%.
For more information in the various types of loan packages, contact your mortgage broker or bank.
