Conforming Loans

A conforming loan conforms to the guidelines set by Fannie Mae and Freddie Mac. The main guideline is

the maximum loan amount. This amount can vary depending on the home’s location—for example, a house in a high-income area can be eligible for a larger loan than one in a general income area. The current 2018 maximum conforming loan limit is $453,100 for one-unit properties. Mortgage insurance is required with any loan over 80% DTI. It can be removed when LTV falls below 80% with a new appraisal.

Other qualification guidelines are concerned with the borrower’s debt-to-income ratio aka DTI, loan-to-value ratio aka LTV, and credit history. DTI is the percentage relationship of your debt to your gross monthly income. The average DTI for Fannie/Freddie loans are 36%/45%. Meaning that your total monthly payment cannot exceed 36% of your gross monthly income. The 45% represents that your new payment with PITI, plus debts cannot exceed 45% of your total gross monthly income. PITI is principal, interest, taxes & insurance + maintenance, or HOA fees if any. Exceptions to programs can go higher than 50% DTI on a case by case basis.