Conforming and Jumbo Loans: Conforming loans refer to loan amounts that conform to government service standards as determined by Fannie Mae and Freddie Mac (the original government agencies, set up in the early 1940s, established to help people finance new homes). Conforming loans range in amount from $1 to $227,150. Although not all conforming loans are serviced by these government agencies, the mortgage industry has adopted the term to express loan amounts in this range. A jumbo (non-conforming) loan refers to those loan amounts outside of the "conforming" range or, above $227,150.
Government Loans: Government loans are guaranteed by the federal government. There are three government agencies that offer loans:
Federal Housing Administration (FHA): Offer loans to homebuyers and requires only 3 to 5 percent as down payment. The maximum amount of the loan is based on the average cost of living in a specific region and you do not have to have perfect credit to qualify. The FHA will cover up to 97.75% of the purchase price. To qualify, your debt-to-income ratio cannot exceed 41% and the homes selling in your city or town should not sell for more than $180,000. See FHA Loans.
U.S. Department of Veterans Affairs (VA): Offers loans to qualified military veterans, who can borrow up to $203,000 with no down payment required. Closing costs might be paid by the seller. VA loans can be used to make home improvements and refinance an existing loan as well as to purchase a home. See VA Loans.
Rural Housing Services (RHS): Offers low interest rate loans to people with low or moderate income and who live in small towns or rural areas.
Affordable Housing Loans: These loans are for those with low to moderate incomes. Usually to qualify, your total household income cannot be more than the median income in the area where you live. The down payments, closing costs, and income requirements are lowered to help those who otherwise would not be able to purchase a home.
Fannie Mae's Community Home Buyer's Program: Provides loans to those with good credit, but who do not meet other criteria to qualify for a traditional mortgage loan.
3/2 Option: A 5 percent down payment is usually required to purchase a home; however, this option allows borrowers to put down only a 3 percent down payment, while a relative, government agency or nonprofit organization puts down the other 2 percent
Fannie 97: Provides loans to those with enough income to pay a monthly mortgage payment, but not enough money to make the initial down payment. Borrowers can put down only 3 percent as down payment; and closing costs can be provided by a relative, government agency or non profit organization. Loan must be for either a 25 or 30 year term.
Related topic: Comparing Mortgage Loans
Types of Mortgage Loans
Mortgages
