Mortgage Rates and Payments Keep Rising, Creating Market Misery – Kiplinger’s Personal Finance
Mortgage Rates and Payments Keep Rising, Creating Market Misery Kiplinger’s Personal Finance
Mortgage Rates and Payments Keep Rising, Creating Market Misery Kiplinger’s Personal Finance
When you’re evaluating home loan categories, it’s easy to get confused by the terms “conventional” and “conforming.” As similar as these two terms may sound, their definitions are different so it’s important to understand the distinctions. We’re here to clear the air. A conventional loan doesn’t have to be guaranteed or insured by the federal government, but it does adhere to Fannie Mae and Freddie Mac guidelines in most cases. A conforming loan, on the other hand, describes a certain set of characteristics, mainly loan amount, contained within a home loan. Within the mortgage industry, loans are repackaged and sold on the secondary market to mortgage investors, the biggest of which include the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac. When a pool of loans adheres to the standards of Fannie Mae and Freddie Mac, the loans are considered “conforming.” When they do not, such as with jumbo loans, they are considered “non-conforming.” Let’s take a closer look at the differences of conforming and non-conforming loans, and how borrowers can assess which home loan will benefit them most. What Is a Conforming Loan? In order for a mortgage loan to be conforming, it must meet the specific criteria that allow Fannie Mae and Freddie Mac to purchase the loan. The most significant of these criteria is the loan limit, which refers to the maximum amount of the loan that Fannie Mae or Freddie Mac will purchase. The loan limit can change from year to year. The Federal Housing Finance Agency (FHFA) has increased the conforming loan limit for a single-family, one-unit property—to $726,200 (as of 2023). Certain areas of the country, such as Alaska and Hawaii, have a higher loan limit due to their higher-priced housing markets. Since Fannie Mae and Freddie Mac are managed by FHFA, they align with FHFA’s loan limits and will only purchase loans within those limits. What Are the Benefits of a Conforming Loan? The primary advantage of a conforming loan is that they typically offer a lower interest rate than a non-conforming loan, which means lower monthly mortgage payments and less money spent over the life of the loan. What Is a Non-Conforming Loan? Non-conforming loans are loans that cannot be purchased by Fannie Mae or Freddie Mac. These types of loans include jumbo loans. Jumbo loans exceed the conforming loan limits and have different underwriting guidelines. Due to the higher risk of jumbo loans, they generally have less-favorable terms and are more difficult to sell on the secondary market. What Are the Benefits of a Non-Conforming Loan? While riskier and less common than conforming loans, non-conforming loans allow individuals to borrow larger amounts than is possible with a conforming loan. You may have heard the term “jumbo loan” before. These include any loans above the conforming limit. In most U.S. counties, the conforming loan limit is $726,200. However, in areas with a high cost of housing, such as San Francisco, the conforming limits are much higher (in that case, $1,089,300). Jumbo loans are usually geared toward high-income earners who have good credit and plentiful assets. Due to the size of the loan, as well as the lack of government insurance, lenders assume greater risk with these mortgages. To reduce the risk, many lenders require borrowers to place a down payment of 20 percent (or higher) or require anywhere from six to 12 months of mortgage payments in an asset account as additional security. The risk to the lender is also offset through generally higher interest rates, greater upfront fees, and stricter underwriting requirements. Choosing the Home Loan Option That’s Best for You As described above, the loan amount, and your financial situation, along with a variety of other factors, dictate which loan type you qualify for. However, there are times when the borrower has a choice. In either case, it’s very important to follow all the same best practices: comparison-shop lenders to understand different programs, rates, fees, and, of course, to confirm the lenders’ quality. To find out more information about the current loan limits and loan programs, contact a Pennymac Loan Officer today.
Tax savings: Home loan top up could be the cheapest loan available for you The Economic Times
If youâre tackling school debt and looking for ways to maximize your tax refund, one avenue to consider is the student loan interest deduction. This benefit allows you to take a tax deduction for the interest you paid on student loans that you took out for yourself, your spouse, or your dependents. The deduction can […]
The post How to Get the Student Loan Interest Deduction appeared first on SoFi.
The effectiveness of the borrowing facility now available to address the mortgage-backed securities risk that contributed to Silicon Valley Bank’s failure remains to be seen, as it has been tapped for at least $12 billion but institutions are leaning more heavily on other funding sources. But experts are hopeful about its usage. “I think that … [Read more…]
It hasnât been a good few weeks for banks whose names begin with âSiâ (Silvergate, Silicon Valley, and Signature, with Silicon Valley Bank declaring Chapter 11 bankruptcy this morning; todayâs Rundown discusses how the bank crisis may impact lenders). Ah, those clever secondary marketing folks. Cornerstoneâs Henry S. frets, âI canât believe itâs bank collapse season already. I just finished taking down my train derailment decorations.â Certainly, time flies by, and I hope youâre wearing some green today. Originally a religious holiday to honor St. Patrick, who introduced Christianity to Ireland in the 5th century, St. Patrickâs Day has evolved into a celebration of all things Irish, with the first parade on March 17, 1762, in New York City, featuring Irish soldiers who served in the English military. It certainly is more fun to think about celebrating the Irish than the constant stream of headlines as people race to conjecture about the health of world banking, and people crying âshoulda woulda coulda.â The markets seem to be performing a stress test on the Fed. The Federal Reserveâs (Fedâs) tightening seems to be finally having an effect, and an early victim has been smaller banks that did a poor job of managing interest rate and deposit concentration risk. (Todayâs podcast can be found here and this week is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking.)
Pending home sales blew past expectations last month as buyers pounced on lower rates CNN
In this episode of the podcast, the hosts discuss whether CDs are a good option and then talk with a listener about how to manage a financial windfall.
If youâve been thinking about getting started in cryptocurrency, Geminiâs easy-to-use platform, educational tools, and watchlists are ideal for beginners.If youâve been thinking about getting started in cryptocurrency, Geminiâs easy-to-use platform, educational tools, and watchlists are ideal for beginners.
The post Gemini⢠review: earn interest on your crypto investment appeared first on Money Under 30.