Finance
What is 'conforming loan limit' and why is it set higher in Hawaii?
AA. Conforming loan limits are identical nationwide; there are no state adjustments
BB. Conforming loan limits are the maximum loan size eligible for purchase by Fannie Mae/Freddie Mac; Hawaii counties have higher limits (up to 150% of the national baseline) because Hawaii's high property values require larger loans✓ Correct
CC. Hawaii's conforming limit is the same as California's; all coastal states share one limit
DD. The FHA sets conforming loan limits; Hawaii uses federal maximums without adjustment
Explanation
Conforming loan limits are the maximum mortgage amounts eligible for purchase by Fannie Mae and Freddie Mac. Congress has authorized higher limits for 'high-cost areas' where median home prices are above the national baseline.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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