Conventional mortgage loans:

Conventional mortgage loans are designed for the conservative home buyer, or owner, who has a minimal credit risk. This type loan can have a fixed rate or an adjustable rate and may fall under either Fannie Mae or Freddie Mac guidelines. Some of the differences in guidelines are below.

Key Benefits
Maximum loan limits:$322,700
Term: Minimum 10 years - maximum 30 years
Fixed rate: Offers a fixed monthly payment for the life of the loan.
Adjustable rate: Lower initial interest rate than a fixed rate mortgage for a specific period of time. After that, the rate adjusts up or down, based on the market conditions, over the term of the loan. An interest rate cap limits the changes allowed at each adjustment period and over the life of the loan.
Ratios: 28/36 (normally)

Fannie Mae guidelines:

- Borrowers must make a minimum down payment of 5% from their own funds, in addition to any gift, unless the gift is 20% or more of the sales price.
Gifts must be from a relative (spouse, parent, stepparent, legal guardian, grandparent, brother, sister, or child), church, municipality or nonprofit organization.
All loans require 2 months PITI in cash reserves or other liquid assets.

Affordable Housing—95% LTV with 3/2 Option: 5% down with 3% from borrower's own funds and 2% from following sources: gift or grant
unsecured loans from public agencies or nonprofit organizations; or
grant-like secured financing from public agencies.

97% LTV Program: 3% down from borrower's own funds
1 month's PITI required at closing

Start-Up Mortgage: 5% down from borrower's own funds
1 month's PITI required at closing
Fannie Mae CHBP: Cash reserves waived

LTV Limits Fixed rate/owner occupied 95%
ARMs 90%
Second home 80%

Freddie Mac guidelines:

On a mortgage with the LTV ratio greater than 80%, a gift from a relative is permitted only if the borrower has made a cash down payment of at least 5%
A gift from an employer, nonprofit religious organization, nonprofit community organization or municipality does not require a 5% down payment.
A gift letter must be maintained in the mortgage file and must: state that the funds are given by a relative (specify relationship)
state that repayment is not expected or required
be signed by the relative (donor)
identify the subject property being purchased
state the amount of the gift
include donor's mailing address
see guide for requirement if gift is from employer, religious organization, etc.

All loans require 2 months PITI in cash reserves or other liquid assets.
Affordable Housing—95% LTV with 3/2 Option: 5% down with 3% from borrower's own funds and 2% from following sources: gift or grant;
secured “soft” second mtg.;
secured second mortgage loans from government or nonprofit organization; or
unsecured loans from public agencies, nonprofit organizations, or employers.
Cash reserves not required

LTV Limits Owner-occupied 95%
ARMs 90%
Second home 80%

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