There are a number of different terms and designations associated with a home loan, many of which may not be too familiar. At Primary Residential Mortgage, we can help by explaining any terms you haven’t heard before, so you can focus on getting the best mortgage option to fit your budget.
One such term is a “conforming loan.”
Conforming Loan Basics and Guidelines
Within the world of mortgages, some loan types are backed by government-sponsored enterprises (GSE) and come with various guidelines. These guidelines generally define what qualifies as a conforming loan. A GSE can purchase a loan that falls under these thresholds, which is desirable for both lenders and buyers due to savings that occur because of its government-backed status.
There are several important guidelines that dictate whether a loan is conforming or non-conforming:
·Size: Also known as the conforming loan limit. Loans have to be under a certain dollar amount to be conforming, otherwise a GSE cannot purchase them.
·Loan-to-value ratio: A value that represents the ratio of a mortgage loan as a percentage of the total value of a property.
·Debt-to-income ratio: The buyer’s level of debt compared to monthly income.
·Credit: The credit score and credit history of the buyer.
Guidelines may also depend on the kind of property being purchased, whether this is your first mortgage, or what loan type you hope to use. If you qualify for a conforming loan, however, these often come with lower rates, lower down payments and, as a result, lower monthly payments.
2017 Limit Increase
For the first time since 2006, the Federal Housing Finance Agency (FHFA) raised conforming loan limits based on rising home prices around the country. As of January 1, 2017, the maximum conforming loan limit became $424,100 for single-unit properties, and up to $636,150 for high-cost areas. This amount varies nationwide because conforming loan limits change based on county. In addition, higher limits are acceptable if you’re purchasing multi-unit properties.
Is a Conforming Loan Right For You?
In general, you have a good chance of qualifying for a conforming loan if your amount comes
in under the thresholds listed above, you have an acceptable credit score and meet the requirements for loan-to-value and debt-to-income ratio (again, these
will vary by county). If you’re unsure whether you meet these requirements, just ask one of our helpful PRMI mortgage professionals.
To learn more about conforming loans, or for information on any of our other mortgage services, speak to the pros at Primary Residential Mortgage today.
If you're ready to take the next step, work with a team that can provide the personal attention you deserve. Our mortgage company has helped over 200,000 borrowers fulfill their dream of home ownership. We'd love to help you too!