Title Research for Conforming & Nonconforming Conventional Mortgages
A conventional mortgage is any type of home buyer’s loan that is available through a lender. Conventional loans fall into two categories: conforming and non-conforming.
- Conforming loans follow the same guidelines as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), and generally offer a lower interest rate.
- A Non-conforming loan does not meet the guidelines of Fannie Mae, Freddie Mac or any other Government-Sponsored Enterprise (GSE), and is typically subject to a higher interest rate.
Financial institutions generally dislike non-conforming loans because they do not conform to GSE guidelines and are harder to sell. Loans are categorized by:
- Loan size
- Loan-to-value ratio (down payment size)
- Borrowers debt-to-income ratio
- Borrowers credit score
- Property type
While the majority of this information is easily verified by a homeowner, property eligibility for certain property types can be much more difficult to verify.
Property Requirements for Conforming and Nonconforming
The type of property can also determine if a mortgage is nonconforming. Fannie Mae has very specific requirements for the types of properties it will secure or purchase mortgages on including:
- Properties must be readily accessible by roads that meet local standards.
- Properties cannot be classified as agricultural properties, such as farms or ranches.
- Condo or co-op hotels cannot have ineligible project characteristics.
- Properties that are not secured by real estate such as, timeshares, boat slips, and some manufactured homes.
While most of these requirements are easily satisfied by a basic title search, condominium eligibility can be much more difficult to determine. Title agencies must perform an examination of not only the individual unit but for the project and the homeowner associations:
- The HOA, developer or co-op corporation cannot be named in any pending litigation related to the safety, habitability, or functional use of the project.
- A single entity, such as the developer or HOA, cannot own more than 10% of the units.
- Space used for nonresidential or commercial purposes may not exceed 35%
When projects do not meet the requirements detailed by Fannie Mae they lose access to the favorable conventional mortgage rates.
Lender Credits and Seller Contributions
Lender credits and seller contributions toward closing costs must fall within the Fannie Mae and Freddie Mac guidelines. Closing costs, which include title insurance and fees, can generally be between 3% and 9% of the purchase price, depending on the down payment amount.
Lender credits and seller contributions often occur in the form of:
- Builder/developer contributions
- Sales concessions
- HOA assessments
- Payment abatements
Work with an Experienced Title Agency
Very few title agencies have a team capable of the detailed research required to successfully navigate the property restrictions for conventional mortgages. Upland Title Agency offers the support of a large group of capable and dedicated title agents and staff members who focus solely on volume condominium closings. Upland Title Agency offers the support of a large group of capable and dedicated professionals who focus on volume condominium closings.
Our team has worked side by side with industry professionals on landmark real estate projects. Every title search, report, and commitment at Upland Title Agency benefits from our 150 years of combined experience.
Contact Upland Title Agency
Upland Title Agency serves Florida real estate and mortgage industry professionals looking for a high-quality alternative to the standard title agency. We are equipped to handle complex, high volume, and time-sensitive conventional, conforming, and non-conforming title work at a competitive price point. Contact us at: 786-687-3295 - email@example.com to discover how working with Upland Title Agency can improve the way you close deals.