Conventional Loans


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Conventional Loan Definition:   A Conventional loan is mortgage loan which is not insured or guaranteed by any agency of the state or the Federal Government.  Conventional Loans are Insured Privately.  These are loans that are sold to FNMA or FHLMC or held in a portfolio (by a bank or S&L and not sold).  "JUMBO" loans are also considered as conventional financing because they are loans which exceed the FNMA and FHLMC limits.

 

LOAN LIMITSThese are loan limits for FNMA and FHLMC.  These are considered conforming loan limits (conforming to FNMA or FHLMC guidelines).

2019 Loan Limits FNMA and FHLMC.  
We Can Fund Single-Family Homes To $726,525 in any County in California With a 700+ Crdit Score. 

Standard Conventional Loan Limits by County 2019·        

 
County Name 2019 Loan Limit 1 Unit 2019 Loan Limit 2 Unit 2019 Loan Limit 3 Unit 2019 Loan Limit 4 Unit
ALAMEDA $726,525 $930,300 $1,124,475 $1,397,400
ALPINE $484,350 $620,200 $749,650 $931,600
AMADOR $484,350 $620,200 $749,650 $931,600
BUTTE $484,350 $620,200 $749,650 $931,600
CALAVERAS $484,350 $620,200 $749,650 $931,600
COLUSA $484,350 $620,200 $749,650 $931,600
CONTRA COSTA $726,525 $930,300 $1,124,475 $1,397,400
DEL NORTE $484,350 $620,200 $749,650 $931,600
EL DORADO $552,000 $706,650 $854,200 $1,061,550
FRESNO $484,350 $620,200 $749,650 $931,600
GLENN $484,350 $620,200 $749,650 $931,600
HUMBOLDT $484,350 $620,200 $749,650 $931,600
IMPERIAL $484,350 $620,200 $749,650 $931,600
INYO $484,350 $620,200 $749,650 $931,600
KERN $484,350 $620,200 $749,650 $931,600
KINGS $484,350 $620,200 $749,650 $931,600
LAKE $484,350 $620,200 $749,650 $931,600
LASSEN $484,350 $620,200 $749,650 $931,600
LOS ANGELES $726,525 $930,300 $1,124,475 $1,397,400
MADERA $484,350 $620,200 $749,650 $931,600
MARIN $726,525 $930,300 $1,124,475 $1,397,400
MARIPOSA $484,350 $620,200 $749,650 $931,600
MENDOCINO $484,350 $620,200 $749,650 $931,600
MERCED $484,350 $620,200 $749,650 $931,600
MODOC $484,350 $620,200 $749,650 $931,600
MONO $529,000 $677,200 $818,600 $1,017,300
MONTEREY $652,050 $834,750 $1,009,000 $1,253,950
NAPA $726,525 $930,300 $1,124,475 $1,397,400
NEVADA $486,450 $622,750 $752,750 $935,500
ORANGE $726,525 $930,300 $1,124,475 $1,397,400
PLACER $552,000 $706,650 $854,200 $1,061,550
PLUMAS $484,350 $620,200 $749,650 $931,600
RIVERSIDE $484,350 $620,200 $749,650 $931,600
SACRAMENTO $552,000 $706,650 $854,200 $1,061,550
SAN BENITO $726,525 $930,300 $1,124,475 $1,397,400
SAN BERNARDINO $484,350 $620,200 $749,650 $931,600
SAN DIEGO $690,000 $883,300 $1,067,750 $1,326,950
SAN FRANCISCO $726,525 $930,300 $1,124,475 $1,397,400
SAN JOAQUIN $484,350 $620,200 $749,650 $931,600
SAN LUIS OBISPO $667,000 $853,900 $1,032,150 $1,282,700
SAN MATEO $726,525 $930,300 $1,124,475 $1,397,400
SANTA BARBARA $625,500 $800,775 $967,950 $1,202,925
SANTA CLARA $726,525 $930,300 $1,124,475 $1,397,400
SANTA CRUZ $726,525 $930,300 $1,124,475 $1,397,400
SHASTA $484,350 $620,200 $749,650 $931,600
SIERRA $484,350 $620,200 $749,650 $931,600
SISKIYOU $484,350 $620,200 $749,650 $931,600
SOLANO $494,500 $633,050 $765,200 $950,950
SONOMA $704,950 $902,450 $1,090,850 $1,355,700
STANISLAUS $484,350 $620,200 $749,650 $931,600
SUTTER $484,350 $620,200 $749,650 $931,600
TEHAMA $484,350 $620,200 $749,650 $931,600
TRINITY $484,350 $620,200 $749,650 $931,600
TULARE $484,350 $620,200 $749,650 $931,600
TUOLUMNE $484,350 $620,200 $749,650 $931,600
VENTURA $713,000 $912,750 $1,103,350 $1,371,150
YOLO $552,000 $706,650 $854,200 $1,061,550









Basic Guidelines for Conventional Loans

 

FNMA and FHLMC:    The guidelines set forth by both of these institutions are the most widely quoted in the industry today. Lenders of all kind use these rules as a standard for their underwriting criteria.  There is an actual book in which these guidelines are published, it is lengthy and is constantly changing as the laws change or the money supply becomes tighter or looser.                 

JUMBO LOANS:    The guidelines for Jumbo loans vary from lender to lender depending on which conduit the lender sells to.  The best way to determine how to structure a Jumbo loan is to contact your MAE Capital Mortgage management or processing.

INTEREST RATES:      Will vary lender to lender because of reserve requirements of banks as are set forth by the government.  As a general rule Jumbo loans will have a higher rate due to the lack of demand in the secondary market.  For best results regarding interest rates contact a mortgage broker, they will have access to most all the lending sources thus being able to offer the best rates on any given day. 

PRIVATE MORTGAGE INSURANCE (PMI)Click here for Graphic


  
Mortgage insurance is required on loans above 80% loan-to-value (LTV) on loans sold to FNMA and FHLMC.  The alternative to having a separate Mortgage Insurance payment is Lender Paid Mortgage Insurance (LPMI) and that can be done on loans up to a 90% Loan To Value.  Mortgage Insurance ensures the lender that if there is a default situation they will be compensated for a percentage of the outstanding loan balance.   There are only a handful PMI companies and their rates are all competitive.  Usually, the lender makes the choice of company for the borrower.  PMI companies will insure loans up to 95%-100% LTV.  
 

Click Here to go to the PMI Calculator to calculate an upfront or monthly premium 

DEBT-TO-INCOME RATIOS DEFINED:    Debt-to-income ratios are best defined as the percentage of the house payment to the total gross monthly income, and the house payment plus monthly bills (minimum payments due)  to total gross monthly income.  Thus a front ratio and a bottom ratio respectively.  These ratios may vary from loan program to loan program and from lender to lender.   However, FNMA and FHLMC have established guidelines which the lenders are supposed to follow.

     

QUALIFYING A Borrower:  

THE 4 "C's" to be Approved for a Home Loan:

Credit:  How is the borrower's credit? It is important to take into consideration what they potential buyer's credit score is and how they handle their personal credit.  This will give the underwriter an indication of how they will handle the mortgage payment, whether they will make the payment on time or not. 

Capacity:  The capacity of the borrower is to be able to show the ability to make the mortgage payment.  This is verified by checking the income of the buyer through their tax returns, pay-stubs and regular deposits to their bank account.  The stability of the borrower's job will also be taken into consideration. 
 

Collateral:  Is the amount of down payment or equity that is being put into the house and the overall value of the home.  The house is actually the lender's collateral and the more equity in the home the less likely the borrower will walk away from the home and the loan. The cash the borrower has in their bank accounts and investments is also taken into consideration as the more money left in the borrower's possession after the consummation of the loan the less likely they will default. 

Character:  A borrower's Character will generally be shown by the way they handle the other "C's".  The borrower's character is important to show as the more you can show the borrower's willingness to make the payments the less risk is involved with making the loan.   This is where the borrower's actions with regards to the way they use credit, the way they handle their savings, the length of time in a profession will show an underwriter if they are a good credit risk or not. 


Underwriting Needs To Verify: 

CREDIT: The next step to the qualification process is to check credit.  The borrower must have acceptable credit it doesn't have to be perfect but within reason.  The underwriter makes the final decision on credit so it is best to get it cleared up front.


EMPLOYMENT: Must be able to verify a two-year employment history.  A history may include schooling and maternity leave.  All gaps in employment must be explained.  If buyer is self-employed they must show at least a two-year record (Tax Returns).
 

FUNDS TO CLOSE: Must be able to verify at least a 3-month history of the funds.  Gift funds are acceptable; however, the donor’s funds must also be traced to a source (i.e. bank statements, or verification of deposit).  The borrower must have at least 5% of their own funds to close.

OTHER RENTAL PROPERTY
: If a Borrower has other property that they rent for income, they must provide 2 years Tax Returns, and the income will be calculated from 75% of the gross rents or Actual Rents as Submitted on the Tax Return.

 
CO-BORROWERS: Are acceptable whether or not they are related.  Some lenders require all borrowers occupy the property others do not.  Note also that FNMA requires that the primary occupant's bottom ratio not exceed 45%. 

BANKRUPTCY: As a rule, you need 4 years seasoning on a chapter 7 bankruptcy before you can buy and 2 years for a chapter 13. 

CONVENTIONAL PROPERTY QUALIFICATIONS: A property must meet a minimum standard in order for it to be considered for standard conventional financing.  Property zoning is an important factor, it must be zoned residential or has to be conforming to the area (i.e. it has to be common to the area).  Note the ultimate decision is up to the underwriter.

 
SPECIFICATIONS: Properties should be in areas with paved streets and amenities already in place.  The total land to value should not exceed 40%.   The age of the property is important, it should have an economic life of more than 30 yrs.                          

APPRAISALS: Are good for up to six months after completion.  The cost of an appraisal for single-family  range from $450 to $900, duplex $700 to $1,100, triplex $1,350 to $1,600, four-plex $1,400 to $2,000.  The price ranges due to different fee schedules charged by the different Appraisal Management Companies. 

Loan Comparisons

The difference between a conventional Loan and a Government loan (FHA or VA) is how the loan is insured.  A conventional loan will require private mortgage insurance unless you put more than 20% down on a home or have a 20% equity position in an existing property.  All other documentation requirements these days are the same as government loans.

 

 Underwriting for a Conventional Loans has become very interesting since the financial meltdown and the insurgence of the Consumer Financial Protection Bureau (CFPB).  The financial melt-down uncovered serval areas in lending where fraud was found in a standard Conventional Loans, so in efforts to thwart this activity, additional checks and balances have been put into place designed to protect the lenders from potential loss from illegal activity.  By putting these measures in place lenders are now required to do additional checks of borrowers social security numbers, income, and income history, IRS checks to make sure the tax returns provided to the lenders are the ones the borrower actually filed, and the following of large deposits to a borrower's bank account.  All these measures imposed by the CFPB (the Government) are supposed to be for the protection of the borrower and in effect hurting the buyer's ability to qualify for these loans as irrelevant deductions and personal deals of the borrowers end up hurting them in qualifying.


When applying for Conventional loans be patient we are going to ask for explanations of just about everything you have done with your finances for the last 2 years.  As Originators we know when we have good clients, but these new rules make us check everything so be patient we will be there to help you through the process.

**ASK ABOUT OUR NO ASSET VERIFICATION LOANS.

To Start the Process complete this form.  or Call us at 916-672-6130
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