In South Dakota and many states like Colorado, Wisconsin, Nebraska, Wyoming and North Dakota, loans come in two types – conforming and non-conforming.  Frankly, this is the case nationwide.  In order to fully understand the difference, you first must know a little bit about Fannie Mae and Freddie Mac.

Freddie Mac and Fannie Mae are the two government sponsored enterprises (GSEs) that provide liquidity in the mortgage market.

Technically speaking, a conventional loan is any mortgage that is not guaranteed or insured by the US government, such as VA, FHA and USDA.

Conventional mortgages include portfolio loans, construction loans, and even subprime loans. But again, whenever a lender refers to a “conventional loan” they are most likely referring to conforming mortgages that are eligible for purchase by Fannie Mae and Freddie Mac.

Property types include 1-4 unite properties, manufactured homes on their own land, condos, and town homes

In the United States, a conforming loan is a mortgage loan that conforms to GSE guidelines. In general, any loan which does not meet guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.

Starting in 1970, Fannie Mae was authorized by the United States Government to purchase residential mortgage loans. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would come to be known as a conforming loan.

The Office of Federal Housing Enterprise Oversight (OFHEO) set the criteria on what constitutes a conforming loan limit that Fannie Mae and Freddie Mac can buy. Criteria include debt-to-income ratio limits and documentation requirements.

The maximum loan amount is set based on the October-to-October changes in median home price, above which a mortgage is considered a jumbo loan, and typically has higher rates associated with it. This is because both Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market, making the demand for a non-conforming loan much less.

USDA Loans, commonly referred to as Rural Development loans provide borrows with a variety of attractive benefits if the subject property falls within the USDA RD Home Loan Footprint.  Don’t worry, our experienced lenders can help you determine if your new home qualifies for a USDA loan with a simple phone call.

USDA loans require no down payment and borrowers may finance up to 100% of the property value.  While these loans are attractive, you must meet income restrictions for the county in which your new home is located.  Each county has a maximum income requirement however the USDA Home Loan Program does allow for certain considerations.  One of the final primary criteria’s is that the property be an owner occupied property, investment properties are not eligible.

The USDA Home loan may be an attractive option for you and your family.  To determine if you (and your new home) qualify for this exciting opportunity, reach out to one of our highly experienced Affiliated Mortgage lenders.

Getting a new mortgage to replace the original is called refinancing. Refinancing is done to allow a borrower to obtain a better interest term and rate. The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage.

What Are The Advantages Of Refinancing?

One of the main advantages of refinancing regardless of equity is reducing an interest rate. Often, as people work through their careers and continue to make more money they are able to pay all their bills on time and thus increase their credit score. With this increase in credit comes the ability to procure loans at lower rates, and therefore many people refinance with their mortgage companies for this reason. A lower interest rate can have a profound effect on monthly payments, potentially saving you hundreds of dollars a year.