Home Equity Advantage: The Deciding Mortgage Number

Summary

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Within the polyglot of terms used in mortgage lending, terms that only seem to confuse rather than clarify, the phrase "conforming loan limit" is tossed about like confetti at a Macy's holiday parade. In truth, the "conforming loan limit" is a deciding mortgage number because it sets upper-level loan limits by the two largest purchasers of mortgage loans, the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), and "conforms" to their requirements.

The "conforming loan limit" has been $417,000 for a single- family home for 2006 and 2007, and will remain the same for 2008. For any loan that exceeds this limit, Freddie or Fannie can not purchase that loan, and another investor not constrained by this limit will have to be found.

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Extract

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Home Equity Advantage: The Deciding Mortgage Number

This generally means the borrower will pay a higher interest rate for a loan above the "conforming loan limit," those loans commonly referred to a...

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