Conforming Home Loans
What is Conforming Loan? If you have ever come across the term “conforming mortgage loan” while you were house hunting in the San Antonio area, you might have wondered whether you could use it to finance your purchase and how it works. As the name implies, a conforming home loan is a loan that “conforms” to certain guidelines that are set forth by Freddie Mac and Fannie Mae. Both of these mortgage corporations are controlled by the federal government. In other words, neither Fannie Mae nor Freddie Mac can lend to borrowers directly. Instead they have to buy conforming loans from lenders, such as Gold Financial Services.
The conforming loan limits that are imposed on the mortgage institutes by the OFHEA (Office of Federal Housing Enterprise Oversight) are meant to make home ownership a possibility for most middle class or lower income Americans. The OFHEA uses the October to October fluctuating percentages in the Monthly Interest Rate Survey of the FHFB (Federal Housing Finance Board) in order to set the conforming loan limits that will be available to borrowers for each consecutive year. However, the maximum loan limit set by the FHFA and Congress can vary from one year to the next. The practice started in 1970 when the United States Government authorized Fannie Mae to purchase residential loans. In most counties such as Texas counties, the amount of a conforming loan comes up to $417,000. However, you can also acquire super conforming loans if you want to use a mortgage loan to purchase a property that is available in an expensive area. The Benefits A conforming mortgage loan is an attractive prospect to a borrower since it comes with interest rates that are far lower than what an average non-conforming loan might offer. As a borrower, you can also save a significant amount of money if your conforming loan meets your needs.
How does a low interest rate benefit a buyer? The lower the interest on a conforming home loan, the lower the monthly payment. Such a convenience can herald a substantial amount of savings that can last throughout the duration of the loan. In addition to the limits imposed by the two mortgage corporations, borrowers are expected to document their finances. Subsequently, conforming loans must also meet the guidelines regarding your DTI (Debt-to-Income) ratio. The imposed limits are revised on an annual basis according to the average sales price of conventionally priced single family homes in the county. Both Fannie Mae and Freddie Mac are in the market for conforming loans. As a result, conforming loans offer greater liquidity as compared to their non-conforming counterparts. Do not confuse conforming loans with jumbo loans. A jumbo loan is any mortgage loan that is higher than the current conforming loan limit in an area.
Want to learn more about home loan conforming and whether a conforming mortgage loan would suit your particular situation? Call us at 210-802-4665 and let our Home Loan Specialists help you determine the best option for you after a thorough needs analysis.