Conforming Mortgages

Conforming mortgage loans are contracts that are purchased by Fannie Mae and Freddie Mac from lenders. Fannie Mae and Freddie Mac convert them into securities and sell them to investors. These two private corporations have particular criteria in order to agree to a mortgage loan for an individual. One is a limit on indebtedness, which is currently at just over $300,000. But this limit changes annually. Individuals cannot obtain a contract that exceeds this limit. Eligibility is also determined by credit history, income, and employment status.

These contracts tend to be for people who plan to live in the same home for many years because conforming mortgage loans are typically given at a fixed rate for either 15 or 30 years. The fixed rate means that the homeowner will pay the same payment every month for the entire life of the loan. Those who move a lot will want to stick with a contract with a variable interest rate. The benefit for paying the higher payment through a conforming mortgage loan is to gain lower interest rates and a lower risk of foreclosure.

If a home buyer feels that a conforming mortgage loan is right for him, that person should sit down and calculate all of the costs. A borrower's credit report and score will be the basis for the terms. A wise consumer will first check out the credit score to become familiar with the terms in which to research the companies. The borrower may find that waiting and improving a credit score can be an advantage when looking for good terms. Another aspect to consider when researching contracts is determining the budget available for the contract. Some people are approved for contracts that are much lower than that person hoped. A buyer should check his debt-to-income ratio to find out if they are acceptable. Another qualification for conforming mortgage loans is that the borrower has held the same type of job for at least six months. These factors are especially important to lenders.

Some people opt to hire a mortgage broker. The mortgage broker knows and works with many lenders at once. They will know which lenders can offer the best deals. The broker will make sure that the buyer is eligible for the type of contract desired and will be able to tell buyers what types of loans and programs they qualify for and how much indebtedness they can get. If, in the end, they aren't eligible for the conforming mortgage loan they want, brokers can offer advice as to how to get it later. Purchasing a home is a major step for anyone. Take time to pray carefully, not just about the home itself but the lender, loan and broker. God tells us to "pray without ceasing," (1 Thessalonians 5:17). Take the time to work on your credit and pay off your debts. These are slow, but easy steps towards owning your own home.

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