Understanding FHA Loan Requirements, VA Loans, Jumbo Loans, & Conforming Loans

HOW ARE CONFORMING HOME LOANS CHANGING?

A conforming loan is another great mortgage option. Currently, conforming agency loans represent the vast majority of mortgages in the United States. In fact, more than half of all loans in the US are conforming loans. Again, let’s pause here to clear up the financial semantics and explain exactly what a conforming loan is.

Here’s a crash course on conforming loans:

As the name suggests, a “conforming” loan conforms to standard Fannie Mae and Freddie Mac guidelines. In our heliocentric solar system, all matter literally orbits the sun, and in the US mortgage industry, everything revolves around these government service enterprises (GSEs).

These two institutions are the “beating heart” of the mortgage industry and exist (as instituted by the federal government) to create liquidity in the mortgage market. This is accomplished by selling bonds and then purchasing mortgage-backed contracts from mortgage origination companies. This allows these institutions to act as the counterpart to those mortgage bonds.

That’s where we enter the picture.

Sierra Pacific Mortgage is known as a “direct agency lender,” and our job is to write loans directly conforming to the guidelines established by Fannie Mae and Freddie Mac. Once a contract is drawn up, if one of these GSEs will buy the contract, we can write the mortgage.

Why does this matter to potential borrowers? Great question! Let’s take a look…

First, this broadens the group of individuals we can ultimately make loans to. More conservative lenders may impose their own set of additional guidelines on top of existing parameters. These subsequent limitations are known as “lender overlays.” At Portland Home Loan, we have no lender overlays and can therefore more often say “yes” to mortgages declined by lenders with such conservative aftermarket restrictions. (Provided the client still meets all the agency guidelines.)

Secondly, direct lending incorporates a few pricing advantages for our borrowers. Because we are not selling our loans to a third party, we’ve effectively cut out the middleman in the deal to create pricing efficiency.

Now, let’s look at some conforming loan requirements!

Conforming loan guidelines are primarily focused on four main areas: your income/employment, your credit profile (credit score, current debts, and your overall history with debts), your assets, and the subject property. These factors will determine the conforming loan amount, the overall rate you are able to lock, and the types of loans available to you.

Let’s be clear about one thing: these requirements exist for every mortgage company in the US. That’s just the way the industry works. These conforming loan limits and guidelines are the foundation of virtually every existing mortgage program. This means that the preliminary underwriting analysis will be fairly similar regardless of the lender you meet with.

So why choose us? We thought you’d never ask…

At Portland Home Loan, we can help you pose the salient financial questions and also assist in crafting money-saving strategies. The inherent pricing advantage found in our agency direct platform combined with our proven strategic planning advice is a winning combination for mortgage loan shoppers. An experienced financial professional will help you find ways to use the lending process to your advantage. A sound strategy is so much more than finding the lowest mortgage rate. The right strategy for you will lower the overall cost of home ownership and add smart leverage to your overall financial plan.

Let’s talk about your options and find the right solution for you.

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