Finance
In New York, a 'conforming loan' is one that:
AConforms to local zoning regulations
BMeets the standards set by Fannie Mae and Freddie Mac for purchase, including loan limits, credit score, and LTV requirements✓ Correct
CIs backed by the FHA or VA
DHas a fixed interest rate conforming to the Federal Reserve's benchmark
Explanation
A conforming loan is one that meets the guidelines set by Fannie Mae (FNMA) and Freddie Mac (FHLMC) for purchase in the secondary mortgage market, including maximum loan limits (which are higher in high-cost areas like NYC and Long Island), credit score requirements, LTV limits, and debt-to-income ratios. Conforming loans generally offer better rates than jumbo (non-conforming) loans.
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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.
ZoningLocal government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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