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Conforming Loans (Fannie Mae and Freddie Mac)

Conforming loans are those that conform to Fannie Mae and Freddie Mac guidelines.  Conforming loans are often referred to as conventional loans, however a conventional loan simply means a traditional 30 year fixed mortgage, which can be obtained with most mortgage products, not just conforming ones.  In the world of manufactured home mortgages, someone might want to pursue a conforming loan if they are not a veteran, if they have more than 5% equity in the home (or more than a 5% down payment), and if their middle credit score is above 620.

The biggest benefits of conforming loans are that they have reduced mortgage insurance requirements and reduced inspection requirements, which makes them cheaper and easier to originate.  For a purchase loan, if you have less than a 20% down payment, or on a refinance transaction, if you have less than 20% equity, mortgage insurance will be required. However, there are more mortgage insurance options available than with government loans and the premiums are typically lower as well.  The mortgage insurance will also drop off over time once your property value increases and your balance decreases to the point of having 20% equity.  Rates for 30 year terms are typically slightly higher than their government loan counterparts, however the reduced mortgage insurance requirement will result in a lower monthly payment when compared to an FHA loan.  There are no requirements for an up-front fee, like there are with all government loans.  In regards to inspections, typically the only one required would be the appraisal.  In the event you were wanting to pull cash out of equity or consolidate debts with a refinance, for manufactured homes, Fannie and Freddie will only allow up to a 20 year term and will cap the loan amount at 65% of the property value.  Unless you have a lot of equity in the home, an FHA or VA loan would be a better option for cash-out or debt consolidation.

Generally, the minimum down payment or equity position required to qualify for a conforming loan would be 5%, although under some conditions it can be as little as 3%.  The minimum credit score required to qualify would be 620, although 640+ is preferred.  Required wait periods after significant derogatory credit events are longer than required for government loans (7 years from foreclosure and 4 years from short sale or bankruptcy).