Conventional loans are secured by government sponsored entities such as Fannie Mae and Freddie Mac. Conventional loans can be made to purchase or refinance homes, single family to four family homes.
The Conforming Loan Limits are published annually by the Federal Housing Finance Agency (FHFA). Alaska, Hawaii, Guam and the U.S. Virgin Islands have loan limits that are 50% higher than the other contiguous states. Early in 2008, there were legislative changes that resulted in temporarily increases of the loan limits in certain high-cost areas in the contiguous United States. Here are a few websites to find additional information:
- http://www.fhfa.gov/Default.aspx?Page=185
- https://www.efanniemae.com/sf/refmaterials/loanlimits/index.jsp
- https://entp.hud.gov/idapp/html/hicostlook.cfm
- http://www.fanniemae.com/aboutfm/loanlimits.jhtml?p=About+Fannie+Mae&s=Loan+Limits
Jumbo loans are higher than the limits set by FHFA. They usually have a higher interest rate and some additional underwriting requirements. A strategy to lower your overall interest payment when your new balance is over the conforming limits is to use a combination of both a first and second mortgage. These are sometimes referred to as 80/10/10, 80/15/5, etc. Every situation is different, but is one more option to consider.
In addition to common loan structures such as fixed rate and adjustable rate, Fannie Mae and Freddie Mac have other loan programs for low to no down payments, community lending and affordable housing initiatives, construction to permanent, home improvement and reverse mortgages. Consult your mortgage professional and consider all your options.