Finance
Which of the following is a characteristic of a 'conforming loan' in New Mexico?
AGovernment insured by FHA
BMeets Fannie Mae/Freddie Mac guidelines for purchase on the secondary market✓ Correct
CHas no down payment requirement
DRequires VA eligibility
Explanation
Conforming loans meet the underwriting standards set by Fannie Mae and Freddie Mac (loan limits, credit requirements, LTV ratios) and can therefore be sold on the secondary mortgage market.
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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.
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.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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.
Math Concepts
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