Conforming loans typically refer to loan amounts that conform to government service standards as determined by Fannie Mae & Freddie Mac. These two government agencies, set up in the early 1940's, were established to help people finance new homes. Conforming loans range in amount from $1 to $275,000. However, not all conforming loans are serviced by these government agencies. The mortgage industry has adopted the term to express loan amounts in this range. Below are the current conforming loan limits for 1-4 unit/condos, primary residences, and second homes:

• 1-unit: $25,000- $322,700
• 2-unit: $25,000- $413,100
• 3-unit: $25,000- $499,300
• 4-unit: $25,000- $620,500
   

Conventional loans that are too large for government agencies are called jumbo loans. Jumbo loans refer to those loan amounts outside of the "conforming" range or, above $322,700 to $5 million + for single/family/condo, primary residence, second homes, and commercial. A Jumbo or Non-Conforming Mortgage Loan is any mortgage that exceeds the conforming loan limit of $322,700. Jumbo loans, like conforming loans, are available as fixed rate mortgages or as ARMs. Typically, jumbo loans are priced slightly higher than conforming loans (usually .125 or .250% on interest rate), due to the limitations of the Jumbo Loans secondary market. Rates on jumbo loans tend to be slightly higher than loans of a lesser value, because lenders generally have a higher risk on these loans.

Conventional Mortgage Loan Limits as of December 1, 2002 - Any Loan Amount Higher is a Jumbo.

Fannie Mae is the most common name of the Federal National Association. Fannie Mae is a congressional chartered, shareholder - owned company that buys mortgages from lenders and resells them as securities on the secondary mortgage market. Before approving you, Fannie Mae looks at a number of factors including credit rating, debt ratio, and employment history. Loans that are approved via Fannie Mae should qualify for a better rate. http://www.fanniemae.com

Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation. The 2003 maximum loan amount for the both Fannie Mae and Freddie Mac is $322,700. Freddie Mac does not issue mortgage directly, rather, they buy mortgage from lenders and sell them as securities on the secondary mortgage market. Factors involved to approved are credit ratings, debt ratio, and employment history. Like Fannie Mae, loans that are approved via Freddie Mac should qualify for a better rate. http://www.freddiemac.com

What is a LIBOR or an Interest Only loan? LIBOR (London Inter-Bank Offered Rate) is the rate on dollar-denominated deposits; also know as Eurodollars, traded between banks in London. The index is quoted for one, three, and six month periods as well as for one, three, and five year periods.

LIBOR is the base interest rate paid on deposits between major banks in the Eurodollar market. A Eurodollar is a dollar deposited in a bank in a country where the currency is not the dollar. The Eurodollar market has been around for over 40 years and is a major component of the International financial market. However, London is the center of the Euro-market in terms of volume.

Wall Street Journal reports the LIBOR rates, and the LIBOR rate quoted in the Wall Street Journal is an average of rate quotes from five major banks. Bank of America, Barclays, Bank of Tokyo, Deutsche Bank and Swiss Bank.

Both Fannie Mae and Freddie Mac use LIBOR as an index on the loans they purchase are currently using LIBOR, and the most common quote for mortgages is the 6-month quote and the three year interest only.
 

• Basically bound to payment the minimum interest-only every month, however, any amount over interest goes towards your principle.
• This is an excellent program to pay less interest and more towards principle.
• Extremely low monthly payments based on extremely low interest rate.
• Those who want to sell the house in near future must consider Interest only plan.

• If you are only paying interest then no money is contributed towards your principle.
• It is possible that you need to refinance your loan after the fixed period is over to keep your monthly payments low.
• If you want to keep the house for a longer period of time then it is not prudent to follow this loan program.

Occasionally, when refinancing a first trust, a borrower wants to obtain cash. They are able to do that by obtaining equity from there home. This means that a borrower can actually receive a check for an amount of money that meets those conditions. Cashing-Out is normally not limited to any type of loan program. If the value of the property is greater than the original loan, then cash may be obtained for the approximate difference. This approximate difference is the Cash Out Refinance amount.

Home equity is the difference between your home's current market value and the total amount you owe on your home loan. As a valuable resource for attaining your financial dreams, home equity loans can be a smart way to get the money you need. With the right loan, you can save money through debt consolidation and getting rid of high-interest debt, or you can pay for some of life's most important expenses like home improvements, weddings, and college. You can also opt for a home equity line of credit, which allows you to borrow against the equity, accrued in your home.

There are many times where it is either difficult or impossible for a potential borrower to show a lender their income on paper. During these cases a borrower may only be required to show an operating license or business license to prove there income information. This type of financing is recommended for people who are either self-employed or whom have difficulty revealing their income.