Posted on: 31st Mar, 2004 04:54 pm
Conforming and non-conforming mortgage loans may both belong to the similar class of conventional loans but differ from each other in various aspects. The prime difference between the two is that they vary in the maximum loan limit allowed by lenders in general. The maximum allowable limit is specified by the government sponsored agencies like Freddie Mac and Fannie Mae. Apart from this, a number of guidelines and criteria for qualifying for these loans are also set up by these organizations.
Conforming and jumbo loans are available at different rates and terms. By offering conforming loans at low rates, Freddie Mac and Fannie Mae help borrowers avail loans requiring low interest payments. This also makes the home buying process easier. It helps most home owners to utilize their budget for expenses other than mortgage payments and also save a considerable part of their income. Borrowers, especially, those qualifying for long term fixed rate conforming mortgage limit can save several dollars due to low interest rates. This has increased the popularity of conforming loans. But jumbo loans are also in high demand. Jumbo loan is a better option, especially for those having poor credit history and requiring greater loan amounts to refinance their existing home loans.
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| Conforming Loan | Non-Conforming Loan | |
| Maximum Loan Limit | Fixed upon by Freddie Mac and Fannie Mae | Maximum amount exceeds the limit set up by the two agencies. |
| Underwriting rules | The rules are in accordance with the criteria established by Fannie Mae and Freddie Mac. | Do not follow the guidelines set up by these agencies. |
| Credit Score | Such a loan is not score driven and is not disapproved because of low score. | In most cases, the credit scores can range from 500 and 700. |
| Interest rate | Rates do not depend upon credit scores as someone with a score of 800 can get the same interest rate as the other with a score of 600. Usually rates are 0.25% to 0.50% lower than that of jumbo loans. This is mainly because the loan amount is comparatively low and hence there is less risk involved. | The interest rates are higher than that of conforming loans. |
| Qualifying ratios | Lenders require a Front-end Ratio of 28% and Back-end Ratio or Debt-to-income Ratio of 36%. | Borrowers can qualify even with higher Debt-to-income Ratio. |
| Down payment | It requires a down payment of 20% of the sale price or the appraised value of the property, whichever is less. But it can be reduced to even 3%. Zero down payment loans are also available. Lenders often require the down payment to be paid from the borrowers's own funds; 2 months cash reserve in the bank is also required. The borrower may have to pay for private mortgage insurance (PMI) premiums since in most cases the down payment is low. | Mortgages are available with down payments of 10% to 20% of the sale price or the appraised value. The down payment can be gift assistance from relatives and friends, or the seller of the property can also finance it. Since the down payment is a little higher, therefore the borrower may not have to pay for the PMI policy. |
| Loan Fees | Loan processing fees are quite low. | Processing fees are slightly higher. |
| Loan Programs | Can be fixed rate as well as adjustable rate loans; has a market dominated by the former type. | Both fixed and adjustable rate loans are available; but market is dominated by the latter. |
Conforming and jumbo loans are available at different rates and terms. By offering conforming loans at low rates, Freddie Mac and Fannie Mae help borrowers avail loans requiring low interest payments. This also makes the home buying process easier. It helps most home owners to utilize their budget for expenses other than mortgage payments and also save a considerable part of their income. Borrowers, especially, those qualifying for long term fixed rate conforming mortgage limit can save several dollars due to low interest rates. This has increased the popularity of conforming loans. But jumbo loans are also in high demand. Jumbo loan is a better option, especially for those having poor credit history and requiring greater loan amounts to refinance their existing home loans.
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can you help me find a lower interest rate on a 40 year fixed at 61/2 %.
Hi,
You can surely refinance your existing jumbo loan to lower the interest rate. However, the rate on the new loan would depend on a lot of factors like your credit scores etc. What is your middle score? A good credit score is vital in getting an attractive interest rate on the loan. Apart from your credit, the amount of discount points you pay upfront will also determine the interest rate on your loan.
What I can suggest you is, seek a no obligation free mortgage quote from the community lenders. They will take a look at your credit scores and other required factors and will offer you free mortgage quotes. It will let you know what kind of interest rates you can expect on your refinance jumbo loan. You can also contact your local lenders to find out what rates they have to offer you.
You can surely refinance your existing jumbo loan to lower the interest rate. However, the rate on the new loan would depend on a lot of factors like your credit scores etc. What is your middle score? A good credit score is vital in getting an attractive interest rate on the loan. Apart from your credit, the amount of discount points you pay upfront will also determine the interest rate on your loan.
What I can suggest you is, seek a no obligation free mortgage quote from the community lenders. They will take a look at your credit scores and other required factors and will offer you free mortgage quotes. It will let you know what kind of interest rates you can expect on your refinance jumbo loan. You can also contact your local lenders to find out what rates they have to offer you.
how can i find out if the area which i want to buy a house is subject to the $417 jumbo rule or if it is higher? I've read that certain areas the jumbo rule goes up to $729.
You can contact a lawyer who is well versed with the real estate laws and check out whether or not your property is subject to $417 jumbo rule.
Are there any stated income mortgages being done these days in CA? I am self employed for 8 months. before that I was w-2 employee in retail with very low income like $15 k annually. Now, my self employment income is higher like $20k or so. I called about 4 mortgage brokers. Most said you need to have 2 year record. but one said he has private lenders that can lend me on stated income basis w/o need for too much docs. Is that too good to be true? What do Ihave to watch out for if I go with such a mortgage. I think they have to give you APY on the good faith estimate? Are there other things to watch out for? thanks
J
J
Hi JJJ,
Stated income loans are hardly available these days especially after the real estate crisis hit the market. Most of the lenders have stopped giving such loans. Nevertheless, you can contact the local lenders of your area and check out if anyone of them can help you in this case. This community has a large number of lenders. You can seek a no obligation free mortgage quote (check out the link from Savior's post) from them and get to know whether or not you'll get a mortgage.
Thanks
Stated income loans are hardly available these days especially after the real estate crisis hit the market. Most of the lenders have stopped giving such loans. Nevertheless, you can contact the local lenders of your area and check out if anyone of them can help you in this case. This community has a large number of lenders. You can seek a no obligation free mortgage quote (check out the link from Savior's post) from them and get to know whether or not you'll get a mortgage.
Thanks