With recent changes (again) in the Home Affordable Refinance Program (HARP), I thought we would review some of the financing options out there and the related agencies. This information proves valuable for homeowners, real estate investors, and investors of MBS (Mortgaged Backed Securities).
A conventional loan is a lender agreement that’s not guaranteed or insured by the VA (Veterans Administration), FHA (Federal Housing Administration), or RHA (Rural Housing Service). A conventional loan can follow guidelines that meet the funding criteria of Fannie Mae and Freddie Mac (more about them a little later). If a loan follows the guidelines set by Fannie and Freddie, it’s considered to be “conforming”, whereas “non-conforming” loans don’t meet those qualifications, but can still be conventional.
Conventional loans can have either fixed or adjustable interest rates. Conventional loans also tend to carry the best interest rates and terms. There is another category of conventional loans, known as jumbo loans. Jumbo loans fall outside of Fannie and Freddie’s maximum loan amounts and they usually carry higher interest rates.
A large majority of conventional loans that meet the guidelines are guaranteed or purchased by Fannie and Freddie.
Who are Fannie and Freddie? Good question.
Fannie Mae stands for Federal National Mortgage Association; it was created as a Government Sponsored Enterprise (also known as a GSE). Fannie Mae was created back in… Continue Reading
