Conforming loans are just that – Fannie Mae and Freddie Mac issue the underwriting guidelines and the conforming loans follow those guidelines. As mortgage performance has weakened, the lending standards have tightened. Guidelines have changed over the past year and now require borrowers to document more income, more reserves, larger down payments and higher credit scores. The one area that hasn't changed is the maximum allowable loan limits.
The Federal Housing Finance Agency released the conforming loan limits for 2010 and they remain the same for the 5th consecutive year. They are:
- 1 unit property: $417,000
- 2 unit properties: $533,850
- 3 unit properties: $645,300
- 4 unit properties: $801,950
Some counties have been declared "high cost areas" and those counties have higher limits up to $729,750. In Minnesota there are not any "high cost areas", so we are limited to $417,000 for conforming loan limits.
Loans that exceed the $417,000 maximum are available, they are called jumbo or non-conforming mortgages. The guidelines are similar to conforming loans, however they usually require more down and the interest rates are usually higher. Sometimes those buying homes over $417,000 will get a first mortgage for $417,000 and a second mortgage to allow them to use conventional (conforming loan limits) 30 yr interest rates for the first mortgage. If you are thinking about doing that, make sure the combined payment is less than the jumbo payment would be.
FHA limits have not been set for 2010 yet. They may also stay the same as the current year, but we aren't sure yet. Once we have a FHA mortgagee letter stating the guidelines, I'll let you know!
