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Conventional/Conforming
Loans |
| Conventional/Conforming
Mortgage -
Financing which is not insured or guaranteed by a government agency. These
conforming mortgages are sold on the secondary mortgage market to Fannie Mae or
Freddie Mac, two quasi-governmental agencies that buy mortgages from cooperating
lenders. The type, maximum LTV ratio,
terms, income/debt
ratios, and
restrictions are set by each agency. The
maximum mortgage on a single family home that both agencies will purchase is currently $275,000
(11/28/2000). Conforming loans tend to have the strictest qualifying criteria. If your
credit is shaky or you have been job-hopping in recent years, you may find it
easier to qualify for a non-conforming mortgage.
We can help you decide on the best course to follow. |
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Typical Conventional
Loans |
| 30 Year Fixed
Rate - A fully amortized
loan which is paid over a 30 year period. The interest rate is fixed
for the life of the loan. When the LTV
(loan to value ratio) is greater than 80%, mortgage
insurance if often required. Down
payment minimums range from 5 to 10 percent. Also see 100%
no money down. |
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| 15 Year Fixed
Rate - A fully amortized
loan which is paid over a 15 year period. The interest rate is fixed
for the life of the loan. When the LTV
(loan to value ratio) is greater than 80%, mortgage
insurance if often required. Down
payment minimums range from 5 to 10 percent. Also see 100%
no money down. |
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| Conforming
Convertible ARM - An adjustable-rate mortgage, which allows you to convert to
a fixed rate at certain specified times, usually between the second and fifth
year. There is a fee to convert,
and your rate will be approximately .325% higher than the going rate for fixed
rate mortgages. If you are purchasing a home and you expect that your income will be
increasing in a few years a conversable ARM, with it lower start rates
(and mortgage payments) can be used to qualify for a larger loan by
meeting the lower income requirements. Your higher future wages then
being available to meet the converted higher rate in future years.
This loan is often helpful for borrowers entering a new profession with increased
wages a real possibility in a few years. |
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| Conforming
"Two Step"
Fixed with ARM
Loans (7/1 5/1
3/1) - An ARM loan, this loan offers a fixed rate for the first
three, five or seven years, then switches to a traditional ARM that fluctuates
with the market. This loan could be useful if you strongly believe that interest
rates will fall, you only plan to have the mortgage for a short period of time,
or, your income will increase substantially in the next few years and you want
to qualify for a higher loan amount.
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