A jumbo mortgage is simply a mortgage loan above the conforming loan limits. We do offer a wide variety of jumbo mortgage products, but they can be harder to qualify for. For more information on the differences between conforming conventional mortgages and jumbo mortgages please see our CONVENTIONAL VS. JUMBO BLOG.

Mortgage Options On Conforming Loans

For conventional mortgages, we offer both Fannie Mae and Freddie Mac mortgages. We even have specialty products such as Home One and Home Ready, please see our HOME READY BLOG or HOMEONE BLOG for more information on these. This article is going to be designed for our clients who are looking for loan amounts between $647,200 and $970,800 and who DO NOT want a conforming mortgage.

Traditional Loan Requirements

The majority of conforming mortgages have high reserve requirements. Reserves are funds leftover in your bank account after a down payment and closing costs. When purchasing a home that fits into the conforming realm, the reserve requirement can escalate quickly. Many conforming loan products require 12 and even up to 18 months of reserves!  Keep in mind, that is above and beyond the down payment and closing costs. The reserve requirement for the Nationwide High Balance Conventional Mortgage is determined per AUS (automated underwriting system), usually just 1 month.

Alternative Mortgage Options 

As stated above we have rolled out a new loan program available for borrowers looking to finance between $647,200  and $970,800  with a Conventional mortgage. This is a specialty loan product that not many lenders have available to them.  It is a great way to close your purchase transaction faster compared to a conforming mortgage. The guidelines also follow Fannie Mae with LIMITED overlays. Since this is a specialty product, and not a government-sponsored enterprise (GSE), there are a few overlays to qualify for this product.

What Are Conforming Loans 

If you’re in the market for a new home, you’ve probably heard of conforming loans. But what exactly is a conforming loan? A conforming loan is a mortgage loan that follows guidelines set by government-sponsored enterprises Freddie Mac and Fannie Mae. These enterprises purchase mortgages from lenders, providing them with the capital needed to continue making more loans. The maximum loan amount for a conforming loan depends on the location of the property being purchased.

The loan limit is the maximum amount that a conforming loan can be for your area. In 2020, the loan limit for most of the United States is $510,400. However, in high-cost areas, the loan limit can be as high as $765,600. You can check the loan limit for your area here.

The underwriting guidelines are the standards that a lender must follow when approving a borrower for a mortgage. These guidelines are set by Freddie Mac and Fannie Mae, and they’re meant to ensure that loans are made to borrowers who have a good chance of being able to repay them. For example, the guidelines require that borrowers have a certain credit score and debt-to-income ratio.

Main Lender Overlays On High Balance Conforming Loans

Main overlays:

• Purchases up to 90% LTV (loan to value)
• Refinances up to 80% LTV (loan to value)
• Must have a minimum credit score of 680 or higher
• The loan amount MUST be at least $1 higher than the county loan limit
• No manual underwriting allowed
• 43% MAX DTI (debt to income)

As you can see this loan product is amazing. Only needing a 10% down payment for what could be qualified as a conforming f

mortgage really opens up the purchase market for higher-cost homes.

High-Balance Conforming Loans Are Available In All High-Cost Counties In The United States

Many areas of the country such as Chicagoland have many homes well above $700,000 and there are not any high balance areas in regard to conventional loan limits. To see a map of high balance counties, please visit The FEDERAL HOUSING FINANCE AGENCY’S WEBSITE.

High-Cost Areas In The United States

The image below gives you an idea of where the high-balance counties of the United States are located:

From the map above, you can see the majority of the country has a maximum conventional loan limit of $484,350. If you are looking to purchase a home where the loan amount will be higher than that, you will need to use a conforming loan or this “high balance nationwide” conventional product.

Benefits Of High-Balance Conforming Loans

Advantages to using the nationwide high-balance conventional mortgage;

• Get around reserve requirements for conforming mortgages
• Typically have a lower interest rate
• The ability to only put down 10%
• The ability to buy out your mortgage insurance premium (more details below)

Private Mortgage Insurance (PMI) On Conforming Loans 

The ability to buy out your mortgage insurance premium (more details below):

• NO monthly mortgage insurance will be required!
• Conforming loans under the loan amount limit require either borrower-paid or lender-paid mortgage insurance if you are putting down less than 20%
• With this nationwide high-balance program, borrower-paid mortgage insurance is NOT an option
• You will buy out the lender-paid mortgage insurance adjustment hit if you do not put down 20%
• This buyout is usually cheaper than the loan level pricing adjustment for lender-paid mortgage insurance

Please see our blog on lender-paid mortgage insurance for more details. This will allow you to have a cheaper monthly payment overall.

A Few More Requirements

Tax Return Requirement On High-Balance Conforming Loans

The requirement of tax returns is slightly different than the Fannie Mae guideline around tax returns. If tax returns are required for any reason and self-employment income is present, 2 years of all personal and business tax returns AND profit and loss statements will be required. All tax documents must be wet-signed. For any business reported, even if not using the income, a profit and loss and balance sheet must be submitted for review. This is more strict than typical conventional mortgages.

Which Type of Loan Is Right for You?

Now that you know the difference between conforming and non-conforming loans, you can start to think about which type of loan might be right for you. If you’re looking for a mortgage, you’ll generally want to choose a conforming loan. These loans tend to have lower interest rates and are easier to qualify for. Additionally, if you do have a conforming loan, you’ll have more options when it comes time to sell or refinance your home.

If you’re not sure whether you can qualify for a conforming loan, it’s a good idea to speak with us. They’ll be able to tell you whether you meet the guidelines set by Freddie Mac and Fannie Mae. Additionally, they can help you explore your other options if you don’t meet the guidelines for a conforming loan.