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Mortgage Terms

Post Independent Writer

MORTGAGE TERMS The mortgage industry has it’s share of uinique terms and acronyms. Although confusing at first, the terms are easy to understand once explained.Loan categories: FHA, VA, and Conventional. FHA and VA loans are considered “Governmental” loans. FHA: Federal Housing Administration The FHA is part of the US Department of Housing and Urban Devejlopment (HUD) and administers various mortgage loan programs. FHA loans have low down payment requirements, but have income limitations. They are commonly used in low income areas with lower priced housing than typically applies to the Roaring Fork Valley.VA: Veterans Administration VA loans are guaranteed by the US Department of Veteran Affairs. These loans are specifically designed to help veterans purchase a home. The VA is not the lender. It determines eligibility and guarantees the loan made by traditional lending institutions. VA loans have maximum loan amounts which also limits their applicability in our valley.Conventional: Any loan that is not a governmental loan (FHA or VA) is considered a Conventional loan. Loan Agencies: FNMA and FHLMC FNMA, called “Fannie Mae”, stands for Federal National Mortgage Association. FHLMC, called Freddie Mac, stands for Federal Home Loan Mortgage Corporation. Fannie Mae and Freddie Mac are stockholder-owned corporations that purchase mortgages in bulk from mortgage lending institutions. They then package these mortgages into securities which they sell to investors. This system replenishes mortgage funds to the lenders, enabling them to continually have funds available for new mortgages in their communities.Fannie Mae and Freddie Mac set the guidelines that borrowers and properties must meet in order to be purchased in bulk. Loans that meet these guidelines are considered safe risks and qualify for the best terms and rates available. Loan types: Conforming, Non-Conforming and Jumbo A “Conforming” loan is one in which all the elements of the borrower and property conform to Fannie Mae and Freddie Mac guidelines. A “Non-Conforming” loan is one in which elements of the property or the borrower do not meet (conform to) Fannie Mae or Freddie Mac guidelines. These loans are considered a higher risk and have a higher interest rate. There are many non-conforming lenders and programs. These loans are frequently used our valley.Jumbo loans have higher loan amounts that the maximum allowed by Fannie Mae and Freddie Mac. Jumbo loans are non-conforming, not due to credit or property issues, but because the loan amount is higher than allowed. The maximum conforming loan amount at present is $359,650. Any loan above this amount is considered a Jumbo loan. Jumbo loans have a higher interest rate than the conforming loans. These loans are very common here, due to the housing costs in our valley.These are the basic terms and acronyms of the mortgage industry. A mortgage lender can help you determine which program fits you best.


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