Residential Loan Products

Conforming Loans

Loans which fit criteria established by the two largest secondary market agencies, Fannie Mae and Freddie Mac, are called Conforming. The most commonly known parameter of Conforming loans is the loan size limit, which is 417,000 (1-unit), $533,850 (2-unit), $645,300 (3-unit), and $801,950 (4-unit). However, the borrower must also meet the credit standards set by the two agencies. Conforming loan qualification is performed using Desktop Underwriter or Loan Prospector Automated Underwriting Systems, while the final approval is subject to underwriting review of the complete loan file. Conforming loans have been and continue to be by far the most frequently used financing solution.

High Balance Conforming Loans

High Balance Conforming loans are Fannie Mae and Freddie Mac loans above standard Conforming limits designed for high cost geographical areas. High Balance Conforming loan limits are set at 115% of median house price for a given geographical location, as determined by Department of Housing and Urban Development (HUD). However, for 2009, the limits have been temporarily raised to 125% of median house price for 1-unit and 2-unit properties. Click here for Permanent and 2009 temporary High Balance Conforming loan limits (please note, this is a Microsoft Excel file). High Balance Conforming loans have somewhat stricter criteria and slightly higher rates than standard Conforming loans.

Jumbo Loans

Jumbo loans are those which exceed Conforming loan limits and therefore can not be purchased by Fannie Mae and Freddie Mac. These are portfolio products offered by large Wall Street investors and banks through their retail and wholesale channels. Jumbo underwriting parameters are more restrictive than on Conforming loans.

Home Affordable Refinance Loans

Home Affordable Refinance loans are designed for borrowers whose current loan is owned by Fannie Mae or Freddie Mac, and who cannot refinance the loan because (and only because) of decreased value. The programs potentially allow financing up to 125% of current home value with no private mortgage insurance (PMI). At least at the moment, borrowers should not have PMI on existing loan. Although the programs allow for existing second loan or equity line to be subordinated (i.e. kept as is), it is very unlikely that the servicer of the second loan or equity line will actually agree to the transaction due to high combined loan to value ratio.

FHA Loans

FHA loans are insured by HUD and are designed to accommodate borrowers with lower down payment and/or less than perfect credit history. FHA loans are more flexible but are also more expensive than conventional Conforming loans. Borrower pays Upfront Mortgage Insurance Premium (MIP) which is financed into the loan as well as Annual Mortgage Insurance Premium in monthly installments to HUD in exchange for HUD insuring the loan against default. HUD has made several changes to FHA loan criteria and costs to adapt to changing market conditions. Please contact us for the latest information.