Conventional – Conforming Home Loans

 

Conventional loans are mortgage loans that are purchased primarily by Fannie Mae (FNMA) and Freddie Mac (FHLMC).  The loan limits for Conforming Fannie and Freddie loans are set by Federal Housing Agency  (FHFA).  This is why you will see the term “Conventional” and “Conforming” being used interchangeably to represent the same type of loan programs.   King, Pierce and Snohomish Counties are considered high cost areas.  Fannie Mae and Freddie Mac permit loans using their High Balance loan limits.                                                                                                
For 2019 most counties limits 484,350 for Single Family homes.  The chart below shows the loan limits for the Pierce, King and Snohomish Counties.
Number of Units Conforming Loan Limits High Balance Loan Limits
1 or Single Family home $484,350 $726,525
2 or Duplex $620,200 $930,300
3 or Tri-Duplex $749,650 $1,124,475
4 or Four-Duplex $931,600 $1,397,400

Condos are considered Single Family homes.

Conventional loan types fall under 2 basic categories:

  • Fixed Rate Home Loans: Fixed interest rate home loans are well suited for the home buyer who plans on being in their home for an indefinite period of time and prefers the certainty of a fixed interest rate.  30/25/20/15/10 year fixed loan options are available.  Purchase Loan to Value (LTV) max is 97% on conforming loans and 90% on High Balance loans,  Cash Out Refinance LTV is 85%. 620 FICO middle score or higher is required for purchases.  The higher the credit score, the better the interest rate on your fixed mortgage.

 

  • Adjustable Rate Loans (ARMs): These conventional products are generally chosen for buyers who know they will own the home for only a specific period of time, and/or will experience an increase in household income.  Initial interest rates are typically lower than fixed rate loans and will adjust at predetermined periods of time. The initial fixed rate period may be 3 years (FNMA 3/1 YR LIBOR ARM),  5 years (FNMA 5/1 YR LIBOR ARM),  7 years (FNMA 7/1 LIBOR ARM) or 10 years (FNMA 10/1 YR LIBOR ARM) .  After the initial interest rate fixed period, rates will adjust annually. Interest rates are established through an established margin and an index (like the LIBOR).  The index is the average of the interbank offered rates for one-year U.S. dollar-denominated deposits in the London market(“LIBOR”), as published in “The Wall Street Journal”.  The most recent Index figure available as of the date 45 days before each Change Date is called the “Current Index”.  Consumers are protected through a CAP structure, depending on which ARM program is selected.  These CAPS establish the maximum allowable initial interest rate adjustment, the maximum allowable annual interest rate adjustment and a lifetime maximum interest rate allowable adjustment.  As an example, a 3/1 ARM–2% initial, 2% annual, 6% lifetime.