Owning a home has always been on the agenda for those keen on achieving the American dream. There’s something incredible about being the proud possessor of a home that you can call your own. Buying a house is often one of the biggest investments that people make in their lifetimes. In many cases, finding that elusive dream house can be so difficult that many people despair of ever finding it. Even if you find it, there’s no guarantee that the terms and conditions will suit you perfectly. Moreover, if finding a house is tough, negotiating the paperwork and finding the finances to pay for it are even more complex.
The decision to move from being a renter to a homeowner can be financially (and emotionally) complex. You might have found the property of your dreams. However, paying for it (or organizing the finances to pay for it) can be quite intimidating. For starters, not everyone has the money to pay for their dream homes upfront. So, these people usually need to take out mortgages. A quick Google search will show a wide selection of loans available for homebuyers. Selecting the best mortgage from the options available can be quite crucial. For this, you’ll need to do your homework. In short, you’ll need to be aware of the different kinds of mortgage loans out there.
There are two kinds of mortgages that homebuyers usually consider. These comprise:
For many people, the rate of interest is among the most important things associated with a loan. However, the size of the loan that you are taking is equally significant as well. For starters, the amount of money you borrow will have an effect on the rate of interest that you need to pay. Also, the size of your loan will highlight the levels of risk you bear to the lender. For these reasons, people bifurcate home loans into the following categories:
In other words, the Conforming Loan Limit (CLL) refers to the maximum principal loan amount beyond which Fannie Mae or Freddie Mac cannot purchase residential mortgage loans. By purchasing these mortgages, Fannie Mae, and Freddie Mac provides a secondary market for mortgages. As a result, lenders package the loans into investment bundles and sell them to these agencies. After that, these lenders are free to disburse loans again.
The average homebuyer usually targets staying within the conforming loan limits. Doing so enables the homebuyer to avail of lower rates of interest. To stay within the prescribed limits, these buyers will look for properties priced beneath the loan limits prescribed for their areas. However, it is worth mentioning that homeowners can still purchase properties priced higher than the conforming loan limits. They can do this by making a large down payment, which would make their loan amount stay within the conforming loan limits. Alternatively, they could use a home equity line stay below the conforming loan limit. Finally, they could use a high-balance loan or jumbo loan, which gets around the loan limits.
The Federal Housing Finance Agency (FHFA) bears the responsibility for determining and publishing the maximum CLL limits applicable for mortgages that Fannie Mae and Freddie Mac acquire in any year. It typically does this based on October-to-October home price data. In many cases, the FHFA announces the new rates in November, which come into force the following January. The Housing and Economic Recovery Act of 2008 established the baseline loan limit at $417,000. The Act also specified that the baseline loan limit would not increase until the prices of homes return to pre-decline levels.
The FHFA ruled that the value of the average US home in the third quarter of 2015 remain below its level in the third quarter of 2007. As a result, it retained the limit of $417,000 applicable to single-unit homes in the continental US for 2016. However, the FHFA did increase the CLL for 39 high-cost counties in 2016. It did this because it found that the value of homes in these areas increased over the prior year. Click here to locate the list of counties impacted by this change.
When it comes to mortgage interest rates, the lower, the better. This is why it makes sense to capitalize on historically low mortgage rates as soon as possible. At Loanatik, you can get the best mortgage rates available. A State Licensed Mortgage Bank, we offer a diverse range of programs tailored to suit your specific requirements. The Better Business Bureau has given us an A Rating for our business practices too. So, don’t put off for tomorrow, when you can easily find the best mortgage rates with us today. To start saving money, fill out our easy loan application here.