Fannie Mae And Freddie Mac Mortgage Loans - Conforming Loans Provide Low Interest Rates
Written by: Carrie Reeder
Conforming loans provide low interest rates since they are
almost guaranteed to be purchased by Fannie Mae or Freddie Mac,
which allows more funds to be available for borrowers. However,
these corporations have terms, such as maximum loan, that limit
how much you can borrow. If you don't meet their terms, you will
need to apply for a non-conventional loan with slightly higher
Fannie Mae and Freddie Mac are stockholder owned companies that
purchase mortgages, package them into securities, and then
resells them to investors. This allows banks and other financing
companies to lend to more customers since their capital is not
tied up in long-term loans.
Fannie Mae and Freddie Mac have strict requirements for
purchasing loans. Basically, they want to reduce their risk
level so they put a cap on loan amounts, credit score, income
level, and down payment.
Conforming Loan Amounts
Each year Fannie Mae and Freddie Mac create new guidelines for
loan amounts. In 2005, a mortgage limit for a single-family
dwelling is $359,650. Limits for multiple family dwelling are
significantly higher, roughly an additional $100,000 per family.
Maximum loan amounts are also 50% higher in Alaska, Guam,
Hawaii, and the Virgin Islands since property prices are higher.
Second mortgages also have their limit. In 2005 the limit was
$179,825, but the total mortgaged amount of both loans could not
exceed $359,650. As with first mortgages, second mortgages can
also be 50% higher in designated areas.
There are other loan options if you don't qualify for a
conforming loan. If you need to borrow more than the maximum
conforming loan amount, then you will want to apply for a jumbo
loan. Because these types of loans are handled on a smaller
scale, their rates are slightly higher than a conforming loan.
If you have poor credit or little down payment, you can use a
subprime lender who specialized in lending to B/C type loans.
You can expect to pay higher rates with these lenders, but many
offer favorable terms. To find the best deal and to avoid scams,
you must research your lender. Compare rates and terms until you
find a favorable financing package.
About the author:
See my recommended Home
Mortgage Lenders online for the lowest rates possible.
Carrie Reeder is the owner of ABC Loan Guide, which offers help
finding the best home
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