Question:

What are the Fannie Mae guidelines for getting a conforming mortgage with the new maximum loan amount?

Answer:

Well, consumers in high cost areas were thrilled to learn about the possibility of taking a conforming mortgage with the new maximum loan amount, as of February 13, 2008.

However, their enthusiasm had to cool off as it was mostly related to a cash-out refinance, or to the chance of getting a jumbo mortgage with conforming rates in high cost metropolitan areas.

It turns out cash-out refinances to a conforming jumbo mortgage are cash limited and jumbos with conforming rates are not easy to find. Here are some guidelines for a conforming jumbo mortgage with the new maximum loan amount limit.

Fannie Mae Rules and Restrictions on Extending Conforming Jumbo Home Loans up to the New Maximum Amount

  1. The new jumbo loans are available only under very scrutinizing full documentation review. Also, a new appraisal with inside and out home inspection will be required.
    • For a purchase of primary residence, a jumbo loan cannot exceed 90% LTV with a fixed rate mortgage.
    • ARMs are allowed for up to 80% LTV and are appraised at the Fully Indexed Rate (FIR).
    • For loans of LTV higher than 80%, you will need to pay private mortgage insurance (PMI), and minimum credit score required is 700. Lower LTV allows FICO of 660.
    • For a refinance, the first mortgage cannot exceed 75% LTV.
    • Combined mortgage LTV with a second mortgage/home equity loan cannot exceed 95% of appraised value.
    • For second homes and/or investment properties purchase or refinance, allowed LTV is 60%.
    • DTI (debt-to-income) ratio limit is 45%.
    • Construction or Construction-to-Permanent financing is not allowed under conforming jumbo.
  2. Second lien holders have to sign a Subordination Agreement before a refinance occurs. That is, they have to agree to remain in junior position while the 1st mortgage is refinanced.
  3. Cash out refinance is not allowed. You could borrow only a little more than your existing mortgage balance to pay for closing costs. If the lender pays you rebates, or points you can't take more than $2000 cash from the transaction. Also, no cash-out refinance to pay down home equity debt is allowed.
  4. The property types allowed for a conforming jumbo mortgage loan with the maximized amount limits are single unit properties and condos. 2 to 4 unit properties, where the owner occupies a single unit and rents out the rest are ineligible.
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