Sat. Nov 28th, 2020

A corresponding loan is a A mortgage that meets the requirements to be purchased by Housing Finance veterans Fannie Mae or Freddie Mac. If you are in the market for a house, you have probably heard the term with others, such as non-debt and traditional loans.

As you choose the right loan for your needs, you should understand the characteristics of a tailored loan. Keep reading to break down what a tailored mortgage is and whether it is the right product for you.

What is the difference between conforming and non-conforming loans?

As the name suggests, a conforming mortgage must meet, or conform to, Freddie Mac and Fannie Mae purchase criteria, including:

  • Dollar limit on loan size determined by Federal Housing Finance Agency, or FHFA
  • Type of property
  • Down payment and credit history of the borrower

When a loan exceeds the FHFA loan limit, it may be referred to as A. Jumbo loan And cannot be purchased by Fannie or Freddie. Jumbo loans usually have stricter rules, such as higher credit scores or cash reserve requirements, compared to other types of mortgages, because the borrower is taking out large amounts of debt.

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Mortgages are also considered nonforming when they do not meet the other purchase requirements of Fannie Mae and Freddie Mac, says Mike Loughie, branch production manager for Silverton Mortgage in Charlotte, North Carolina.

Fannie Mae and Freddie Mac use strict underwriting criteria including credit score and Debt-to-income ratio Guidelines, for loans that buy and sell on the secondary market. They allow lenders to offload risk and pass better rates and conditions to borrowers.

What is the loan limit for 2020?

The corresponding loan limit in 2020 for single-family dwellings is $ 510,400. This is an increase from the 2019 limit of $ 484,350.

Limitations are high for versatile properties. Caps in 2020 are:

  • $ 653,550 for two-unit property
  • $ 789,950 for three-unit property
  • $ 981,700 for four-unit property

What is a high-balance confirming loan?

Although most counties have followed baseline limits, some areas with higher-than-average property values ​​will have higher conforming loan limits, says Doug Lever, mortgage sales manager for Tropical Financial Credit Union of South Florida.

In Florida, only Monroe County – Keys’ home – has an average home price that exceeds the typical conforming loan limit, he says.

Other high-cost areas occur in the West Coast as well as the Northeast, Alaska, and Hawaii. For a single unit home in these areas, the loan limit in 2020 is $ 765,600.

Counties in these areas allow for high-balance analog loans that exceed the baseline. Lending guidelines should be followed by FHFA.

You can find the corresponding loan limit for your area here, Or talk with a mortgage professional.

Is a custom loan the same as a traditional loan?

Some people use terms that interchange debt and traditional debt, but there is a difference.

A traditional loan is simply a loan that does not have government assistance or insurance. Some of the mortgage government agencies include the Federal Housing Administration, the US Department of Agriculture, and the US Department of Veterans Affairs.

All custom loans are traditional loans, but not all conventional loans are loans. Take this example: A jumbo mortgage may not be a conforming loan because it exceeds the loan limit of Fannie and Freddie, but it can be a conventional loan if it is definitely found. Lending standards.

How can you get a loan?

To qualify for a tailored loan, you must meet the guidelines set by Fannie and Freddie. Contains:

  • Credit score of at least 620
  • In some cases debt-to-income ratio of up to 45% and 50%
  • A stable and verifiable income

The debt-to-income, or DTI, ratio refers to how much of your income is required to cover your monthly debt payment. If you make $ 7,000 per month and you pay $ 2,000 for your home loan and $ 1,000 for your other monthly bills, your DTI will be around 43%.

An income situation that is straightforward can also be helpful. “The way we verify income should be very traditional,” Laffey says.

W-2 showing steady income can make qualification easier if you have fluctuations Self employed income Or if you are ready for a job in the last few years. This is not to say that freelancers or entrepreneurs cannot get tailored loans, but they may have to jump through more paperwork to obtain.

If you can’t meet the standards to suit the loans, don’t worry, Laffey says. He says, “Markets and other programs are available for those who don’t fit in that box.”

Have a good loan?

When you obtain a conforming loan, you are working within limits FHFA has considered low risk.

A tailored loan can offer a great deal if you meet the lending criteria, LaFay says. “If you can pay stubs and W-2s, and your credit and debt ratios are in line, you can end up with better terms” with a tailored loan, he says.

But most important, Lever says, “shop around and meet with a reliable lender.”

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