Do you know the difference between conforming and non-conforming loans? They are both conventional loans, but with a few differences.
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.
For more information, check out the federal website.
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.
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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