Latest news with #FreddieMac
Yahoo
2 days ago
- Business
- Yahoo
Jumbo vs. conventional loans: What's the difference?
Key takeaways A jumbo loan is actually a type of conventional loan — just bigger than usual, as the name implies. Because they exceed the loan limit set by the Federal Housing Finance Agency (FHFA), jumbo loans are considered nonconforming and have stricter lending guidelines. Conforming loans of lower amounts have less stringent credit criteria and lower down payment requirements. Overview: Jumbo loans vs. conventional loans A conventional loan is a mortgage that's originated and financed by a private lender, rather than the federal government. By that definition, a jumbo loan can actually be a type of conventional loan, so it's not exactly an apples-to-apples comparison. A better comparison might be jumbo conventional loans, which are nonconforming, versus conforming conventional loans. Shop Top Mortgage Rates Personalized rates in minutes A quicker path to financial freedom Your Path to Homeownership Conventional mortgages can be either conforming or nonconforming. A conforming mortgage meets the requirements set by the Federal Housing Finance Agency (FHFA) — the most common of these stipulates that the size of the loan be set at or below certain dollar limits. These limits vary from state to state, and even by counties within states. For 2025, the conforming loan limit is $806,500 in most areas, and up to $1,209,750 in higher-priced places. When a mortgage is conforming, it is eligible for Fannie Mae and Freddie Mac to buy on the secondary mortgage market. Knowing that these government-sponsored entities, major players in the mortgage industry, can purchase a mortgage greatly reduces a lender's risk in offering it. A jumbo loan is a conventional loan, but since it doesn't conform to the FHFA standards due to its size, it's considered nonconforming. If you're financing the purchase of a high-priced home, a jumbo loan can allow you to borrow the amount you need, even if that amount is higher than the conforming loan limit. Many mortgage lenders offer jumbo loans up to $3 million or $5 million. You might be able to find jumbo loans in even higher amounts, especially if you work with a mortgage broker who's a jumbo specialist. Key differences between jumbo and conforming loans While jumbo and conforming loans are both conventional loans, there are some significant differences to be aware of. Jumbo loans Conforming loans Minimum credit score 700 620 Minimum down payment 20-25% 3-5% Minimum DTI ratio 36-43% 43-50% Cash reserves Up to 12 months Up to 6 months Rates Higher due to elevated risk Could be lower, depending on your financial profile Qualifying for a jumbo loan While there are several qualifying factors that impact whether you can get a jumbo loan, the most important is your credit score. The minimum required is higher, for a start: 700 for a jumbo, as opposed to 620 for a conforming conventional loan. And while you can qualify with the minimum credit score, the best mortgage rates go to borrowers with scores of 740 or higher. You should also be prepared to make at least the minimum down payment — which, not surprisingly, is typically a larger percentage of the purchase price than for a conforming conventional loan. And you'll also need to meet the lender's debt-to-income (DTI) thresholds, which tend to be lower (that is, take up less of your monthly earnings). It's possible, eventually, to refinance a jumbo loan into a conventional conforming loan — provided the jumbo's remaining balance is at or below your area's conforming loan limit. Mortgage rates for a jumbo loan Many jumbo loan rates may actually be lower than those on some conforming loan offers, since lenders still want to remain competitive. Otherwise, jumbos tend to be influenced by the factors that move mortgage rates and interest rates in general, such as the benchmark federal funds rate the Federal Reserve sets. The particular interest rate you'll get, of course, depends on your personal financial circumstances. Most jumbo loans are conventional loans backed by private lenders. However, jumbo FHA and VA loans do exist — the maximum amount you can borrow may not be as big as that of conventional jumbos, though. Deciding which loan is right for you Jumbo and conventional conforming loans each have unique purposes, so it's important to choose the right one for your situation and financing needs. You might benefit from a jumbo loan if: You are purchasing a high-priced home You are purchasing in an area with a high cost of living You have a high income and an excellent credit score Your monthly debt load is low You can make a down payment of 20 percent or more A conforming loan may be a better option if: You are purchasing a moderate home, priced within the local loan limits You have a lower income Your credit score is just 'good' or 'fair' You have little savings or financial assets You have limited funds available for a down payment FAQs Are jumbo loans more difficult to qualify for? Yes — the lending criteria for jumbo loans are tighter than for conforming loans, mainly because the loan amounts are higher. In addition, they pose an elevated risk to lenders, because they can't be sold on the secondary mortgage market as easily. Is mortgage insurance required for jumbo loans? Not usually, because most lenders require a down payment of at least 20 percent to get a jumbo loan. Since that 20 percent threshold is met (or exceeded), private mortgage insurance is not required. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
How to improve your finances before your first mortgage
Key takeaways Improving your finances before applying for a mortgage gives you the best shot at getting good terms. In evaluating your creditworthiness, lenders consider your credit score, income and other assets, debts, the amount of your debts in relation to your income, and your employment history. Improving your credit score, reducing your debt load and ramping up your savings can boost your financial profile. Shop Top Mortgage Rates Your Path to Homeownership A quicker path to financial freedom Personalized rates in minutes As a first-time homebuyer, you might not have a substantial income or savings to work with. That doesn't mean you won't qualify for a mortgage, however. There are many ways you can prepare your finances to be a more competitive mortgage applicant. Here are three ways to get your finances in shape before submitting a mortgage application. What financial elements are considered in the mortgage process? How do you know you're really ready for a mortgage? There are some signs that might point to yes, according to Freddie Mac. These include: Your credit score: One of the biggest determining factors for mortgage approval is credit score. A credit score of 661 or higher places you in the creditworthy category, according to Freddie Mac. If your score is between 600 and 660, you could be close to being ready for a mortgage but not quite there yet. If your score is 599 or lower, you're likely not ready to take on the additional debt. Your debt-to-income (DTI) ratio: DTI is also significant, and there are two measures. The front-end ratio, which compares your projected monthly mortgage obligation to your monthly income, should be, ideally, 25 percent or less. The back-end ratio — your overall debt, including auto loans and student loans, can be higher, but most lenders like it to be no more than 36 percent, with 43 percent as the max. No bankruptcies/foreclosures: Your credit profile should be free of these blemishes for at least seven years. Timely debt payments: Your credit report should also be free of debt payments that are 90 days or more overdue. Bankrate's take: This isn't to say you won't get approved for a mortgage if you have a lower credit score or don't meet all of the other criteria — you just might be stretching yourself too thin or unable to achieve other financial goals. How to improve your finances before getting a mortgage When you apply for a home loan, the mortgage lender reviews all aspects of your credit and financial profile to assess your risk as a borrower. This includes your credit history and score, employment history, income, debt and savings or other assets. The strength of these factors helps the lender decide whether to approve or deny you for a loan and for how much. Below are three tips to boost your chances of getting approved for the amount you want. 1. Check your credit Well before you apply for a mortgage, it's a good idea to review your credit reports and scores to ensure all information is up-to-date and accurate. You can obtain your credit reports (which don't include your scores) for free once a year from each of the three credit bureaus (Equifax, Experian and TransUnion) through When reviewing your report, keep an eye out for any errors that may be dragging your score down, such as inaccurate reports of late payments or balances that remain on your report that you've already repaid. To correct the error, submit a dispute to the credit bureau. Taking the time to ensure your credit report is accurate can help improve your score. 'You can't fix what you don't know about and the earlier you identify issues, the more time you have to resolve them,' says Brian Vieaux, president of FinLocker, a fintech company that helps consumers prepare their finances for a mortgage application. 'Checking your credit helps you identify surprises, collections, high utilization or errors that can be fixed in advance. Even a 20-point bump in your score could save thousands over the life of your loan.' When you apply for a mortgage, lenders may look at your scores from each credit bureau and base a decision on the middle number. For most mortgages, you'll need a minimum credit score of 620, although some loans allow for as low as 500 or 580 if you have other 'compensating factors,' such as substantial savings. The best interest rates and terms go to borrowers with scores of 740 or higher. 2. Work on your debt To improve your credit score, strive to pay all your bills on time. Nothing dings your score like late payments. If you're having trouble making payments, now's the time to contact creditors or service providers to arrange a payment plan or other form of relief. Along with maintaining a history of on-time payments, start chipping away at any outstanding balances. There are many ways to tackle them, including: Debt avalanche strategy Debt snowball strategy Debt consolidation options Aside from the positive impact on your credit score, less debt lowers your DTI ratio. Lenders take this into account when determining how much to approve you for. It depends on the loan program, but most lenders look for a DTI ratio of no more than 45 percent, although some are stricter and cap it at 36 percent. Others are more flexible, and will allow up to 50 percent. You can use this DTI ratio calculator to get a sense of where you stand. 'Your debt-to-income plays a major role in shaping your mortgage application, impacting how much lenders might be willing to lend,' says Felton Ellington, vice president and community lending manager for Chase Home Lending. 'If a large chunk of your income goes toward paying down debt, that means your DTI is high. Lenders typically want to see that your DTI is low, as it tells them you'll be able to manage your monthly payments with minimal issues.' Lastly, avoid taking on any new loans. This will add to your debt load, which increases your DTI ratio and can potentially dent your score. This is especially so if your credit utilization is already high or you can't handle the additional payments. 3. Get serious about savings Unless you qualify for a no-down payment mortgage, you'll need to be ready with considerable upfront cash. Here are some things to save for: Savings for a down payment – As of April 2025 , the median down payment on a home was $56,100, according to ATTOM Data Solutions, an analyst of property and real estate data. The good news is that you can get away with putting down as little as 3 percent for a conventional mortgage. Closing costs – The amount of closing costs depends on where you're buying, but they generally range from two to five percent of the purchase price. Nationally, the average closing costs were $6,905 in 2021, the latest year for which figures were available. Moving costs – Be sure to budget for moving costs as well, especially if you plan to hire a moving company. General reserves – It's a good idea to set aside a portion of money to pay for costs like furniture or home repairs. An emergency fund – This should equal about three to six months of your living expenses. 9% The percentage of a home purchase price that first-time buyers typically make as a down payment. Source: National Association of Realtors Even if you don't know your homebuying budget or how much house you can afford yet, start saving now. Here are some strategies: Put funds earmarked toward the home purchase in a high-yield savings account. Avoid or cut back on eating out and other discretionary expenses. Cancel unnecessary memberships, services or subscriptions. Sell items you no longer need or want, such as clothing or furniture. You can also accelerate savings in other ways as well.'One of the best things you can do to save for a home is make practice payments,' says Mason Whitehead, a home loan specialist with Churchill Mortgage. 'If you are paying $1,500 for rent and you think you can afford a $2,500 mortgage payment, start living that way now and put the extra $1,000 — in this scenario — into savings and live like you had that obligation now.' What if I can't improve my finances? Due to income, you might be limited in how much you can put toward debt or savings. That's OK — this could simply mean you need to wait to become a homeowner or need more time to get established in a career and build your earnings. In the meantime, do everything possible to maintain your credit score. If you can't afford or don't qualify for a mortgage now, with good financial habits, you'll be able to in the future. FAQs How much money should you have before buying a house? The amount of money you should have before buying a home depends on your budget (your income, your other obligations), how much home you'd like to buy and the amount of cash you can afford to pay upfront. When buying a home, you need to have enough money for a down payment and closing costs. It's also important to have money for moving costs and enough savings as a cushion for emergencies. Is $50,000 enough to buy a house? Not outright, certainly, but it's about enough to cover a down payment. The median sale price of a home in May 2025 was $422,800, according to the National Association of Realtors, and the average down payment is 15 percent as of 2025. A 15 percent down payment on the median-priced home would amount to $63,420. That figure does not include closing costs or moving expenses. When should I start saving for a house? The sooner you can start saving for a house, the better. But if you have a lot of debt, it may make more sense to pay down some of it before saving for a house to have a better DTI ratio and qualify for better mortgage rates. 擷取數據時發生錯誤 登入存取你的投資組合 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤
Yahoo
3 days ago
- Business
- Yahoo
US single-family housing starts, permits decline in June
WASHINGTON (Reuters) -U.S. single-family homebuilding and permits for future construction fell sharply in June as high mortgage rates and economic uncertainty hampered home purchases, suggesting residential investment contracted again in the second quarter. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.6% to a seasonally adjusted annual rate of 883,000 units last month, the Commerce Department's Census Bureau said on Friday. Permits for future single-family homebuilding decreased 3.7% to a rate of 866,000 units. Shop Top Mortgage Rates Your Path to Homeownership A quicker path to financial freedom Personalized rates in minutes Economists view President Donald Trump's sweeping import tariffs as posing an inflation risk. That has prompted the Federal Reserve to continue to pause its interest rate cuts. Consumer and producer inflation data for June suggested the import duties were starting to drive up prices for some goods. Trade policy uncertainty and worries over the country's rising debt load have boosted U.S. Treasury yields, keeping mortgage rates elevated. The average rate on the popular 30-year fixed mortgage has hovered just under 7% this year, data from mortgage finance agency Freddie Mac showed. Trump last week announced higher duties would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union. Trump in April slapped a 10% duty on nearly all imports, while giving nations a 90-day period to negotiate trade deals. The slump in demand has increased the supply of homes on the market, discouraging builders from breaking ground on new housing projects. New housing inventory is at levels last seen in late 2007. A National Association of Home Builders survey on Thursday showed the share of builders cutting prices to attract buyers rose in July to the highest level since 2022. Residential investment, which includes homebuilding, contracted in the first quarter. It is expected to have remained a drag on gross domestic product in the second quarter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
US single-family housing starts, permits decline in June
WASHINGTON (Reuters) -U.S. single-family homebuilding and permits for future construction fell sharply in June as high mortgage rates and economic uncertainty hampered home purchases, suggesting residential investment contracted again in the second quarter. Single-family housing starts, which account for the bulk of homebuilding, dropped 4.6% to a seasonally adjusted annual rate of 883,000 units last month, the Commerce Department's Census Bureau said on Friday. Permits for future single-family homebuilding decreased 3.7% to a rate of 866,000 units. Economists view President Donald Trump's sweeping import tariffs as posing an inflation risk. That has prompted the Federal Reserve to continue to pause its interest rate cuts. Consumer and producer inflation data for June suggested the import duties were starting to drive up prices for some goods. Trade policy uncertainty and worries over the country's rising debt load have boosted U.S. Treasury yields, keeping mortgage rates elevated. The average rate on the popular 30-year fixed mortgage has hovered just under 7% this year, data from mortgage finance agency Freddie Mac showed. Trump last week announced higher duties would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union. Trump in April slapped a 10% duty on nearly all imports, while giving nations a 90-day period to negotiate trade deals. The slump in demand has increased the supply of homes on the market, discouraging builders from breaking ground on new housing projects. New housing inventory is at levels last seen in late 2007. A National Association of Home Builders survey on Thursday showed the share of builders cutting prices to attract buyers rose in July to the highest level since 2022. Residential investment, which includes homebuilding, contracted in the first quarter. It is expected to have remained a drag on gross domestic product in the second quarter. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
Mortgage and refinance interest rates today, July 18, 2025: Mortgage rates are slightly lower than last summer
Mortgage rates have been increasing over the past two weeks. According to Freddie Mac, the national average 30-year fixed mortgage rate has gone up by two basis points to 6.75% this week, and the 15-year fixed interest rate has risen by six basis points to 5.92%. If you are a prospective home buyer, it could benefit you to lock in on a mortgage now rather than waiting until next year. Interest rates are pretty much compared to this time last year. The current 30-year fixed rate is lower than July 2024 by just two basis points, and the 15-year rate has decreased by 13 basis points. There's no guarantee that rates will significantly drop over the next year, either. That being said, mortgage rates are unpredictable and change daily. If you are looking to buy a house, think more about whether buying now would fit your financial situation and personal circumstances than about interest rates. Learn more: When will mortgage rates go down? Predictions after 2 weeks of increases. Current mortgage rates Here are the current mortgage rates, according to the latest Zillow data: 30-year fixed: 6.71% 20-year fixed: 6.56% 15-year fixed: 5.90% 5/1 ARM: 7.43% 7/1 ARM: 7.38% 30-year VA: 6.32% 15-year VA: 5.73% 5/1 VA: 6.48% Remember, these are the national averages and rounded to the nearest hundredth. Current mortgage refinance rates These are today's mortgage refinance rates, according to the latest Zillow data: 30-year fixed: 6.71% 20-year fixed: 6.60% 15-year fixed: 5.96% 5/1 ARM: 7.46% 7/1 ARM: 7.55% 30-year VA: 6.35% 15-year VA: 6.27% 5/1 VA: 6.38% Again, the numbers provided are national averages rounded to the nearest hundredth. Mortgage refinance rates are often higher than rates when you buy a house, although that's not always the case. Learn more: Want to refinance your mortgage? Here are 7 home refinance options. Refinance interest rates Up Next Up Next Free mortgage calculator Your mortgage rate plays a large role in how much your monthly payment will be. Use this mortgage calculator to see how your mortgage amount, rate, and term length will impact your monthly payments: To get an even more detailed look at your potential monthly payment, use our Yahoo Finance mortgage calculator. It also factors in your homeowners insurance, property taxes, mortgage insurance, and HOA fees. How mortgage interest rates work A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable. A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 6% interest rate, your rate will stay at 6% for the entire 30 years unless you refinance or sell. An adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically. Let's say you get a 7/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first seven years, then the rate would increase or decrease once per year for the last 23 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and housing market. At the beginning of your mortgage term, most of your monthly payment goes toward interest. Your monthly payment toward mortgage principal and interest stays the same throughout the years — however, less and less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed. Learn more: Adjustable-rate vs. fixed-rate mortgages Which mortgage term length should you get? A 30-year fixed-rate mortgage is a good choice if you want a lower mortgage payment and the predictability that comes with having a fixed rate. Just know that your rate will be higher than if you choose a shorter term, and will result in paying significantly more in interest over the years. You might like a 15-year fixed-rate mortgage if you want to pay off your home loan quickly and save money on interest. These shorter terms come with lower interest rates, and since you're cutting your repayment time in half, you'll save a lot in interest in the long run. But you'll need to be sure you can comfortably afford the higher monthly payments that come with 15-year terms. Read more: How to decide between a 15-year and 30-year fixed-rate mortgage Typically, an adjustable-rate mortgage could be good if you plan to sell before the introductory rate period ends. Adjustable rates usually start lower than fixed rates, then your rate will change after a predetermined amount of time. However, 5/1 and 7/1 ARM rates have similar to (or even higher than) 30-year fixed rates recently. Before getting an ARM just for a lower rate, compare your rate options from term to term and lender to lender. Are mortgage rates decreasing? Yes and no. Mortgage rates have increased a little this week, but they have decreased a tad since July 2024. Overall, interest rates haven't made any giant moves one way or the other. Mortgage interest rates will probably stay relatively high for the rest of the year. The latest Fannie Mae and Mortgage Bankers Association (MBA) forecasts predict that mortgage rates will stay above 6% even through 2026. Mortgage interest rates today: FAQs What are mortgage interest rates doing today? According to Freddie Mac, the national average 30-year mortgage rate is up three basis points to 6.75%, and the average 15-year mortgage rate has increased by six basis points to 5.92%. How low will mortgage rates go in 2025? According to its June forecast, the MBA expects the 30-year mortgage rate to be 6.8% in Q3 2025 and 6.7% by the end of the year. That's just a one basis point revision higher from its May outlook. The MBA is looking for mortgage rates to remain in the mid-6% range through 2026 and have an annual average of 6.3% in 2027. How high could mortgage rates go by 2025? Mortgage rates are likely to remain mostly unchanged through the third quarter of 2025, with a chance that they may slip slightly lower by the end of the year.
