My team originates both conforming and jumbo loans. But what are the differences between the two? Conforming mortgages are appropriately named; they “conform” to the mortgage underwriting guidelines of Fannie Mae or Freddie Mac. Conforming loan limits vary by property type, and are typically set for the year. In 2011, for the 6th consecutive year, the 1-unit conforming mortgage loan limit is $417,000 in most parts of the nation, but is $533,850 for 2-unit properties, $645,300 for 3-unit properties, etc.
But not every home is subject to the $417,000 Fannie & Freddie loan limit. Some homes — specifically those in “high-cost areas” — are granted loan limit exceptions that currently range all the way up to $729,750. ”High-cost” is defined by the median sales price of a region, and the expanded loan limits help homeowners in many places in the Bay Area. Homeowners don’t have to take “jumbo” loans because their respective mortgages exceed $417,000. Instead, they get the same low mortgage rates as the rest of the country. The US government groups cities and towns into “Metropolitan Statistical Areas,”, or MSA’s, and the median home price in that particular area is just “average”.
There are 197 designated high-cost areas in the U.S., representing just 6% of the country. Mortgages that exceed the local loan limit are often called “jumbo” or “super jumbo” mortgages. The good news is that jumbo and super jumbo mortgages are plentiful right now and the pricing is excellent, especially for ARM loans. The Todd Galde Mortgage Team is working on several jumbo loans right now. The key to eligibility is to have documented income and better-than-average credit scores. If your mortgage (or your clients mortgage) is too big for local conforming limits and is jumbo or super jumbo, don’t hesitate to send me an e-mail and we’ll be happy to help find the best product.
Your Mortgage Advisor for Life,
Todd
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