Conforming and Non-Conforming Loans

Do you know the difference between conforming and non-conforming loans? They are both conventional loans, but with a few differences.

Conforming Loan

Conforming loans are backed by Fannie Mae and Freddie Mac and can’t exceed the FHFA loan limits.

The loan limit was recently increased to $510,400 in November of 2019!

These loans must meet the underwriting guidelines set by Fannie Mae and Freddie Mac, which are the government sponsored entities that buy conforming loans. This is a secondary market for mortgages. Which allows lenders to package loans into investment bundles, and sell them, so they are able to lend again.

Benefits of a conforming loan:

  1. Easier to qualify for.
  2. Can have a lower mortgage interest rate
  3. May offer a lower down payment.
  4. Can allow some wiggle room with your credit score.

For more information, check out the federal website.


Non-Conforming Loan

Most non-conforming loans are considered jumbo loans. The terms and conditions can vary widely from lender to lender, but the mortgage rates are usually higher because there is more risk involved. These loans can not be purchased by Fannie Mae or Freddie Mac.

Nonconforming loan factors:

  1. Minimum down payment of 20% or more.
  2. Stricter credit qualifying criteria.
  3. Higher mortgage interest rate.
  4. You may have credit issues, which equates to risk.
  5. Your debt to income is too high.

For additional details, check out the following website.


If you can’t qualify for a conforming mortgage, you may consider an FHA loan. It will usually require a lower down payment of about 3% and your credit score can be lower. Although, there may be additional fees involved with this type of loan. Make sure you discuss with your preferred lender in full!

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