New Jersey Conforming Loans: Low-Interest Rates and Monthly Mortgage Payments
Conforming Loan Definition
If you are looking for a loan with lower interest rates and monthly payments, New Jersey conforming loans are a perfect option. Conforming loans are mortgages set by the Federal Housing Finance Agency and under the guidelines of Freddie Mac and Fannie Mae.
The government sponsors Freddie Mac and Fannie Mae entities which purchase mortgages from lenders to keep them on their books or sell them to potential buyers.
Why Choose Conforming Loans?
Having a loan that abides by the Fannie Mae and Freddie Mac guidelines has its perks, such as:
- Lower interest rates to borrowers, making them an excellent option if you want to get a lower monthly payment.
- Many different lenders offer these loans, allowing you to compare conforming loans rates, prices, and services.
- Conforming loans follow a strict set of rules, protecting the borrowers and lenders from fraudulent practices.
Conforming vs. Non-Conforming Loan
Loans that don’t meet the Fannie Mae or Freddie Mac guidelines are known as non-conforming loans. They exceed the conforming limit, have higher interest rates, and require more significant down payments.
Jumbo loans are one of the most common types of non-conforming loans and have strict credit-qualifying principles, with a thorough inspection of your income and credit history.
How Much Down Payment Can You Afford?
To qualify for New Jersey conforming loans, you will need a minimum credit score of 620, a maximum LTV (loan-to-value ratio) of 97%, a DTI (debt-to-income ratio) below 50%, and a 3% down payment.
All factors are dependent, so the requirements for a loan will depend on your situation. If you have a lower credit score, you might have to make a larger down payment. Your status may vary based on your financial profile and how much you’ve saved to cover the mortgage payments.
Conforming Loan Limitations
If you want a conforming loan, you can’t borrow more than the maximum amount set in Fannie and Freddie’s guidelines. The limit changes every year, based on various factors, and in 2020 it was $510,400. In areas where property prices exceed median values, the amount you can lend is a multiplier of the median property value.
Also, Freddie and Fannie set a specific cap, so if property prices are high in your county, you can borrow a maximum amount. For conforming loans in high cost areas, the maximum loan amount is 150% of the standard limit.
How To Apply for a Conforming Loan
If you want to apply for a conforming loan in New Jersey, you’ll need to meet the specific criteria for each of the following:
- Loan-to-value ratio – the amount you lend vs. the home value
- High credit score – the higher your score, the higher the chance of being approved
- Assets in reserve – for some amounts, you’ll need to provide six or more months of assets
- Debt-to-income ratio – the number of monthly payments relative to your income
- The property type – there are different rules for a two-unit property and a single-family home
Conclusion
New Jersey conforming loans come with lower rates and peace of mind knowing the lender adheres to the Freddie and Fannie requirements.
Contact Cornerstone Capital Financial Services, LLC at 201-514-5942 to discuss your options.