Conventional Loans

Who are Fannie Mae and Freddie Mac?

fannie-mae-and-freddie-macThe Federal National Mortgage Association (FNMA) commonly referred to as Fannie Mae and The Federal Home Loan Mortgage Corporation (FHLMC) commonly referred to as Freddie Mac are Government-Sponsored Enterprises (GSE’s), whose purpose is to expand the secondary mortgage market by securitizing mortgages in the form of Mortgage Backed Securities (MBS), which in turn allow all kinds of mortgage lenders, from Banks, to Credit Unions, Savings and Loans, Mortgage Bankers, and Mortgage Brokers to reinvest their assets into more lending and in effect increasing the number of mortgage lenders in the mortgage market.

Mortgage loans which are backed by Fannie Mae and/or Freddie Mac are commonly referred to as Conforming or Conventional Mortgage loans, and typically refer to any loan that isn’t Government insured.

Fannie Mae provides the underwriting guidelines for most conventional mortgages through it’s automated underwriting engine called Desktop Underwriter, or DU.

A common misunderstanding about conventional mortgages is that a large down payment is required in order to use this home loan program.

Conventional financing allows as low as a 5% down payment when used in conjunction with a private mortgage insurance carrier.

Requirements

Borrower Requirements:

  • Owner Occupied and Investment Property loan allowed
  • Minimum 620 Credit Score
  • Full income / asset documentation only – W2 and/or tax returns
  • 5% minimum down payment – New guideline after November 16th, 2013
  • Approved buyer assistance can be used up to 100% combined loan to value
  • 45% Debt to Income (DTI) ratio / 50% DTI allowed with compensating factors

Terms

Loan Terms:

  • 30 Year Fixed
  • 20 Year Fixed
  • 15 Year Fixed
  • 10 Year Fixed
  • 5/1 | 7/1 | 10/1 ARM – Adjustable Rate Mortgage

Helpful Tip: Private Mortgage Insurance required for loans above 80% loan to value

Programs

Specialty Mortgage Loan Programs:

Fannie Mae HomePath Mortgage Program

  • No Private Mortgage Insurance
  • No Appraisal
  • Only available on Fannie Mae Owned Properties
  • Available in high-cost areas

Fannie Mae HomeStyle Renovation Mortgage Program

  • 5% down-payment allowed
  • Finance the cost of your renovation into your final loan amount
  • Lower interest rate than other renovation loan options
  • With or without Private Mortgage Insurance

Home Affordable Refinance Program or HARP:

  • Reserved for homeowner’s with a current Fannie Mae Loan
  • No Appraisal
  • No Private Mortgage Insurance
  • No loan-to-value limits
  • Reduced income verification and documentation
  • All property types eligible, primary home, second/vacation home, and investment property

Freddie Mac Relief Refi:

  • Reserved for homeowner’s with a current Fannie Mae Loan
  • No Appraisal
  • No Private Mortgage Insurance
  • No loan-to-value limits
  • Reduced income verification and documentation
  • All property types eligible, primary home, second/vacation home, and investment property

Eligibility

Properties Eligible for Conventional Financing Include:

  • One (1) unit family residence – single family residence (SFR)
  • Two (2) unit family residence – duplex (owner must occupy one unit)
  • Three (3) unit family residence – triplex (owner must occupy one unit)
  • Four (4) family residence – fourplex (owner must occupy one unit)
  • Single Family One (1) Unit Condominium – with HOA approval
  • Single Family Attached One (1) Unit Townhome – with HOA approval

Loan Limits

Maximum Loan Limits:

Conventional mortgage loans offer Standard Balance and High Balance financing options. These loan limits are standard across the board regardless of State or County.

Colorado Standard Balance: One (1) unit = $417,000, Two (2) unit = $533,850, Three (3) unit = $645,300, and Four (4) unit = $801,950

Denver Metro Area Counties which include Adams, Arapahoe, Broomfield, Douglas, and Jefferson Counties:  One (1) unit = $424,350, Two (2) unit = $543,250, Three (3) unit = $656,650, Four (4) unit = $816,050
Colorado High Balance: One (1) unit = $625,500, Two (2) unit = $800,775, Three (3) unit = $967,950, and Four (4) unit = $1,202,925

Maximum High Balance Loan Amounts differ by county, but may never exceed these amounts

Waiting Periods after a Derogatory Credit Hardship:

  • Four (4) Years from Discharge of Chapter 7 Bankruptcy
  • Two (2) Years from Discharge of Chapter 13 Bankruptcy
  • Seven (7) Years from Foreclosure
  • Two (2) Years from Short Sale or Deed-in-Lieu of Foreclosure with minimum 680 credit score and 20% down payment
  • Three (3) Years from Short Sale or Deed-in-Lieu of Foreclosure with minimum 680 credit score and 10% down payment

Christian Durland NMLS#249348 | Colorado Loan OfficerChristian Durland NMLS#269348 I've been in the Mortgage Industry since 2002. Since theres no one size fits all solution, my team and I focus on understanding each clients unique short and long-term financial goals, and then recommending the optimal financial instrument (mortgage), whether its for a new home purchase or refinance.
I've established a strong network of professionals within the Real Estate and Financial Services Communities to provide the valuable resources necessary for our clients to be financially successful.