| Conforming loans provide low interest rates since they | | | | multiple family dwelling are significantly higher, roughly |
| are almost guaranteed to be purchased by Fannie | | | | an additional $100,000 per family. Maximum loan |
| Mae or Freddie Mac, which allows more funds to be | | | | amounts are also 50% higher in Alaska, Guam, Hawaii, |
| available for borrowers. However, these corporations | | | | and the Virgin Islands since property prices are higher. |
| have terms, such as maximum loan, that limit how | | | | Second mortgages also have their limit. In 2005 the limit |
| much you can borrow. If you don't meet their terms, | | | | was $179,825, but the total mortgaged amount of both |
| you will need to apply for a non-conventional loan with | | | | loans could not exceed $359,650. As with first |
| slightly higher interest rates. | | | | mortgages, second mortgages can also be 50% |
| Loan Purchasers | | | | higher in designated areas. |
| Fannie Mae and Freddie Mac are stockholder owned | | | | Non-Conforming Loans |
| companies that purchase mortgages, package them | | | | There are other loan options if you don't qualify for a |
| into securities, and then resells them to investors. This | | | | conforming loan. If you need to borrow more than the |
| allows banks and other financing companies to lend to | | | | maximum conforming loan amount, then you will want |
| more customers since their capital is not tied up in | | | | to apply for a jumbo loan. Because these types of |
| long-term loans. | | | | loans are handled on a smaller scale, their rates are |
| Fannie Mae and Freddie Mac have strict requirements | | | | slightly higher than a conforming loan. |
| for purchasing loans. Basically, they want to reduce | | | | If you have poor credit or little down payment, you can |
| their risk level so they put a cap on loan amounts, | | | | use a subprime lender who specialized in lending to B |
| credit score, income level, and down payment. | | | | C type loans. You can expect to pay higher rates with |
| Conforming Loan Amounts | | | | these lenders, but many offer favorable terms. To find |
| Each year Fannie Mae and Freddie Mac create new | | | | the best deal and to avoid scams, you must research |
| guidelines for loan amounts. In 2005, a mortgage limit | | | | your lender. Compare rates and terms until you find a |
| for a single-family dwelling is $359,650. Limits for | | | | favorable financing package. |