Loan limits set by Fannie Mae and Freddie Mac recently jumped to $484,350 for most of the U.S. and as high as $726,525 in places where the cost of housing is high, such as New York City, Los Angeles, San Francisco, Washington, D.C., Alaska and Hawaii.
This is great for buyers: These loan limits mean you’ll have an easier time buying a more expensive house. Conventional loans require a down payment as low as 3% of the purchase price and a credit score of 730. If you need to take out a mortgage that’s larger than the conforming loan limit in your county, consider a jumbo loan, which requires a larger down payment (usually 20%) and a credit score of 800.
Fannie Mae and Freddie Mac are government-backed enterprises that secure mortgages and create a market for home loans in the United States. This allows lenders to keep making loans—they don’t have to tie up their money for 30 years when they issue a mortgage. Fannie Mae and Freddie Mac buy loans from private lenders, sell the mortgages to investors and then take the money and make more loans.
What this means is that thanks to Fannie Mae and Freddie Mac, there are more home loan options available to you at better terms, like Fannie Mae HomeReady mortgages for low- to moderate-income buyers.
In most cases, to qualify for Fannie Mae and Freddie Mac mortgages, your debt-to-income ratio can’t exceed 36% of your monthly income. Your FICO score should be at least 620 to qualify for a mortgage with a fixed interest rate and at least 640 to qualify for an adjustable-rate loan. Then you’ll need to find an approved lender by phoning around or checking the Internet.