Understanding Home Loans is something that has been a bit confusing for many. It is something you "should" know about but you might not know. Well, we all started somewhere didn't we? Here is a brief synopsis of Home Loans which I hope will help you as you progress thru your search for a Marin home.
There are Conforming, Non-Conforming and Government loans. The Conforming loans are supported by Fannie Mae (FNMA) and Freddie Mac (FHLMC), and this means that banks can find a ready “buyer” for the loan once it is made to you. This gives banks greater flexibility to approve loans and offer more competitive rates to the consumer.
Conforming loans will primarily be fixed rate or variable rate loans, so you will have some options. Non-Conforming loans are usually loans that fall outside of the loan amounts and characteristics supported by FNMA or FHLMC, so oftentimes jumbo loans are considered “non-conforming.” Non-Conforming loans are usually retained by the individual banks that make them, so the terms and qualifying criteria can be unique to that bank. As of this writing, each County has a jumbo-conforming loan limit (Marin’s is $729,750), so if a loan amount exceeds this limit, the loan would be considered non-conforming.
Finally, there are Government backed loans. In these cases (FHA, VA and Rural Housing, for example), a loan can be made by a bank, but it will be insured by the corresponding federal agency. This can be a real benefit to the veteran or to the first time buyer, as some of these programs will allow down payments as low as 3.5%, even on jumbo-conforming loan amounts.
Also, remember if you are a first time home owner you can get a tax credit up to $8000 and if you are a “move up” buyer, you may be eligible for up to a $6500 tax credit if you are in contract before April 30, 2010 and closed by June 30, 2010!