The conforming loan limit is $417,000. That is the maximum loan amount that Fannie Mae and Freddie Mac are allowed to buy from lenders across the United States. These purchases provide liquidity and lower rates for these “conforming” loans.

The 2006 median sales price in Fairfax County, Virginia, is reported to be $525,100. If prospective purchasers are interested in a higher priced home could they use a conforming loan without having a large down payment? Does a mortgage insurance premium need to be paid? It is not tax deductible by those earning more than $100,000 per year. Would you as a buyer have to get a jumbo loan and a higher rate?

Earlier this year jumbo rates were anywhere from one quarter to one half higher than conforming mortgages. But since a liquidity crisis has strangled the credit markets, jumbo rates are now at least one full percent higher than conforming rates for fixed rate mortgages.

Don’t fret! You can still use a conforming loan to purchase a home costing as much as $556,000 without any down payment whatsoever. You can do this by keeping the first trust at the maximum $417,000 limit and combining it with a second trust of $139,000. This is commonly referred to a 75/25 combo or piggyback loan. They also come in different flavors including an 80/20 or for those with a down payment the 80/10/10, the 80/15/5 or the 75/15/10.

These combinations can help you to avoid any or all of the following: jumbo rates, necessity for a down payment or mortgage insurance. Skipping any one of these will keep more money in your pocket. Avoiding all three is priceless.

Author: Stephen A Myers
Article Source: EzineArticles.com
Provided by: Canada duty