Lower Rates for Some Conventional Loans

 In Qualifying for a Mortgage

Fannie Mae and Freddie Mac have increased the income limits for some conventional loans, resulting in lower interest rates for some borrowers.

Here’s what you need to know.

Area Median Income

Some conventional loans have lower interest rates for borrowers who earn less than 80% of the Area Median Income (AMI).  Recently, the AMI levels for most parts of the country were increased.  That means more borrowers will now qualify for lower rates.   

In the past, 80% of the AMI in the Denver area was $80,000, so if you earned less than $80,000, you could qualify for a lower rate.  Now, 80% of the AMI for most of the Denver area is $83,400.

Qualifying Income

Here’s what that means for you.  If your qualifying income is $83,400 or less, you can get a mortgage with a lower rate, and if you have less than 20% down and need to have mortgage insurance, that will also be lower.

The income that’s used to determine whether you qualify for the lower rates is based on your “qualifying income”, which is the amount of income we need to get you approved for the loan.  If you earn more than $83,400, but we don’t need all of your income to get you approved, you can still get the lower rates and mortgage insurance.  

An Example

Here’s an example.  Let’s say you make $110,000 a year, but your base salary is $82,000 and the rest of your income is overtime pay, commissions, or bonuses.  If we can get an approval using just your base pay of $82,000, it doesn’t matter that your total income is over the limit, you still can get the lower rate.

We sell a lot of these loans, and we do everything we can to get you the best deal, so if you qualify for these lower rates, we’ll tell you about it and save you some money.

Contact us today if you need a pre-approval for either a purchase or a refinance transaction.  You’ll be amazed at how easy it is to get a mortgage when you use us as your lender.

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