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Conforming Loans - what the bank wants to see

First of all: What is a conforming loan?

Wikipedia Definition: 

In the United States, a conforming loan is a mortgage loan that conforms to GSE (Fannie Mae and Freddie Mac) guidelines. The most well-known guidelines is the size of the loan, which as of 2013 was generally limited to $417,000 for single family homes in the continental US.

Ok, so what how does a buyer qualify for a conforming loan?

According to Peggy Fowler, Mortgage Specialist, Equity Resouces:

CONFORMING LOANS

  • 5% down for Primary Residence
  • 10% down for 2nd home
  • 20% down for investments (higher rates)
  • With 20% down there is no mortgage insurance
  • Less than 20%, call me for the quote which varies with certain criteria
  • There are Rate bumps (add on’s) due to lower loan amounts and lower credit scores
  • Disputed accounts on the credit bureau may need to be addressed – worst case they will need to be removed or corrected which can impact scores.
  • A borrower may convert an existing primary residence to a rental property and use the rental income to qualify *IF* they have at least 30% equity in it, proven by an appraisal minus the outstanding liens.  If this is done then 75% of the rental income may be used to offset the mortgage payment for debt ratio purposes. The rental income must be documented with a copy of a signed lease AND the receipt of the security deposit from the tenant and it must be deposited into the borrowers account.
  • Installment debt with less than 10 payments may be excluded from the debt ratio.  (leases not included in this rule)
  • 401K loan payments are not included in the debt ratio when the asset balance exceeds the outstanding loan balance as documented with the most recent quarterly statement.
  • Deferred student loans are included regardless of the length of the deferment.  2% of the balance OR verification of the monthly payment from the servicer will be used in liabilities/debt ratio.
  • The 5% down for a 1-unit primary residence may be a gift
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Rick Giles
Phone: 941-400-0848‚Äč
Email: SiestaRick@gmail.com

Bright Realty
5218 Station Way
Sarasota, FL 34232
941-552-6036

 

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