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Conforming

Conforming Loan Overview

The term “Conforming Loan” is a catch-all phrase that refers to the general industry standard loan that conforms to specifications laid out by government-sponsored entities Fannie Mae and Freddie Mac in return for guaranteeing the mortgage.

Conforming loans generally have slightly stricter standards than specific government loan programs. The conforming loan can be used for investment properties and second homes.

Nationwide, this loan program has a ceiling of $417,000; however, Fannie Mae and Freddie Mac calculate a “high cost” loan ceiling in areas with higher median home prices. In San Luis Obispo County, the ceiling is $561,200.

Additional recent measures have increased the nationwide ceiling to aid the post-bubble housing market. Locally, the extension moved conforming standards up to $687,500. This further extension is due to expire on September 30, 2011 and Congress will review plans to continue the program. Contact your loan officer for more information on current conforming loan standards.

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Loan Specifications

Maximum price varies based on location. The recent nationwide benchmark has been  $417,000. In San Luis Obispo County, the conforming loan limit is $561,200. The extension due to expire on Sept. 30, 2011 moved the SLO county limit up to $687,500

Minimum credit score: 580

Debt-to-income ratio (DTI): 50 percent (Fannie Mae), 50 percent (Freddie Mac)

Minimum 3 percent down payment—mortgage insurance required on down payments under 20 percent.

Variable loan durations and rate specifications (adjustable or fixed mortgages) available.

Down payment generally is not eligible for gift. Some exceptions included, such as when using 5 percent of own funds for down payment, and when entire 20 percent is taken as a gift.

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Features

Loan duration flexibility.

No mortgage insurance with 20 percent down payment.

Stricter qualifying standards: minimum credit score and DTI.

Investment property and second home eligible.