Jumbo conventional conforming loans are simply conventional home loans with the loan amount above the conforming loan limit, which is $417,000 as of 2015, according to Freddie Mac. Conventional loans are mortgage loans that are sold on the secondary market, so you may also hear these loans referred to as sold-on-the-secondary-market loans. Like all mortgages, these loans require you to pay interest only for the first few years before shifting to full amortization, at which point you will begin paying principal and interest on your mortgage payments each month.
How much can I borrow with a conventional loan?
A conventional loan is any mortgage that is not backed by the federal government. This includes products like Fannie Mae and Freddie Mac loans, as well as private lender products. To be considered a conforming loan, the loan must meet certain guidelines set forth by these organizations. The main difference between a conforming and non-conforming loan is the loan limit. For 2019, the maximum amount for a conforming loan is $484,350. Non-conforming loans can have higher limits. However, borrowers are required to put down at least 20% of the purchase price (plus closing costs) on their new home when taking out a jumbo loan.
What are the limits on how much I can borrow with a Fannie Mae conventional loan?
The limit for a conventional loan varies by county but is generally $484,350 for a single-family home. A jumbo loan is any loan amount that exceeds the conventional limit. If you’re looking to borrow more than the conventional limit, you’ll need to apply for a jumbo loan. Jumbo loans typically come with higher interest rates and stricter underwriting standards than conventional loans, so make sure you’re prepared before you apply. For example, to qualify for a Fannie Mae jumbo loan, your credit score must be at least 740.
What does conforming mean?
A conforming loan is a mortgage that meets the guidelines set by government-sponsored enterprises Freddie Mac and Fannie Mae. These two GSEs purchase and securitize the majority of residential mortgages in the U.S. So when a lender originates a conforming loan, they know it will be easy to sell on the secondary market. That’s why conforming loans usually have lower interest rates than non-conforming loans. For an applicant to qualify for a conforming loan amount, they must meet some basic requirements.
Can I use these loan limits on a jumbo mortgage?
No, the loan limits only apply to conventional conforming loans. A jumbo mortgage is a non-conforming loan because it exceeds the loan limit. Even if you could use the loan limits on a jumbo mortgage, it wouldn’t make sense because you would be paying more in interest. For example, on a $1 million home with a 4% down payment, an ARM for 30 years will cost about $30K/year in mortgage payments and an FHA for 30 years will cost about $45K/year. On the other hand, an FHA for 40 years would cost about $38K/year and an ARM for 30 years would cost about $22K/year.
Don’t jumbo mortgages have higher interest rates than conforming loans because they are riskier loans to originate?
A jumbo mortgage is a type of home loan that exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In most U.S. counties, the conforming loan limit is $484,350. However, in high-cost areas like San Francisco and New York City, the limit is higher: $726,525. Jumbo loans typically have higher interest rates than conforming loans because they are considered riskier for lenders. To offset this increased risk, lenders will often charge an interest rate that is 1% to 2% higher on a jumbo loan than they would on a conforming loan.
Am I locked into the loan limits when I get my loan commitment?
No, you are not locked into the loan limits when you get your loan commitment from your lender. The Federal Housing Finance Agency (FHFA) recently announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2019 will be $484,350. This is an increase from $453,100 in 2018. The maximum loan limit in high-cost areas will be $726,525. In all other areas of the country, it will be $484,350. If you’re considering buying a house worth more than this amount, then you may need to look at getting financing from another source such as the Veterans Administration or having a down payment higher than 20%.
Do most lenders require borrowers to have a 10% down payment?
A jumbo loan is a mortgage that has a loan amount that exceeds the limits set by the Federal Housing Finance Agency (FHFA). So, if you’re looking to take out a mortgage that’s higher than $453,100 (or $679,650 in high-cost areas), then you’ll need to apply for a jumbo loan. Most lenders will require borrowers to have at least a 10% down payment for a jumbo loan. But some offer financing with less than 10% down. Borrowers should do their research and shop around before applying for a jumbo conforming loan. The key difference between these loans and conventional loans is their interest rates and points, which are typically higher as compared to conventional loans.