What Is The Difference Between A Conforming And Non-Conforming Mortgage?

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Two terms which seem to be confusing to Borrowers and even some Realtor/Agents are Conforming and Non-Conforming Mortgages.  The two terms seem to imply something more complex than they are.  As a result a fairly common question I get is What Is The Difference Between A Conforming And Non-Conforming Mortgage?

The answer to the question is really very simple.  In its most basic form the difference between a Conforming and Non-Conforming mortgage is the loan amount.  If a loan amount is within the maximum loan limit (presently  $417,000) allowed by the Government Sponsored Enterprises (GSE's) Guidelines (Fannie Mae & Freddie Mac), then the loan is considered a Conforming Loan, if it is over the $417,000 then it is considered a Non-Conforming Loan which is also know as a Jumbo Loan.

The Loan Amount is the single most disguising feature between a Conforming Loan and a Non-Conforming Loan (Jumbo), but their are other Guidelines Conforming Loans need to meat which Non-Conforming Loans don't.  Non-Conforming Loans are usually portfolio loans (the Lender will keep the loan in house), while most  Conforming loans are sold on the Secondary Market and have to meet Fannie Mae & Freddie Mac Guidelines.  Another difference between Conforming Loans and Non-Conforming Loans are Interest Rates.  Non-Conforming Loans tend to have higher interest rates than Conforming Loans. 

Some of the other main Guidelines Conforming Loans have to meet are:

  • Debt-To-Income.
  • Downpayment 
  • Credit Scores
  • Credit History
  • Gift Funds
  • Assets
  • Work History
  • Required Documentation

The above are not all the Guidelines which Conforming Loans have to meet, but they are the most common.

This is as basic as I can get in answering the question of What Is The Difference Between A Conforming And Non-Conforming Mortgage?  I could go into more detail, but the purpose of this blog is just to provide a basic understanding of what constitutes a Conforming and No-Conforming Mortgage, so when you hear these terms you know what is being referred to.

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & #FL and can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Lynn B. Friedman 01/04/2014 07:12 AM
  2. Tammie White, Broker 01/11/2014 11:31 AM
  3. Frank Rubi 01/11/2014 12:49 PM
Topic:
Mortgage / Finance
Location:
Connecticut
Groups:
Active Rain Newbies
Realtors®
Mortgages
1st Time Buyers
Real Estate Rookie
Tags:
conforming and nonconforming loans

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Rainer
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Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

Great explanation of thee two types of loans. People geet cconfused with this and both are very  acceptable loans. Some thing nonconforming is no good 

Jan 04, 2014 09:34 AM #23
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Julie Dumaine-Russell
RE/MAX Alliance - Branford, CT

George - great explanation for everyone.  You made it so easy to understand the differences between these two types of loans.

Jan 04, 2014 12:33 PM #24
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Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

George,This is a great consumer post and will be read for years to come. Buyers are becoming more and more educated and wanting to know the facts.

Jan 04, 2014 01:03 PM #25
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
I'd like to read more about this before a form an opinion. Love and light and prosperity in 2014, Laura
Jan 04, 2014 01:40 PM #26
Rainmaker
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Janis Borgueta
Key Properties of the Hudson Valley - Newburgh, NY
LIC RE Salesperson

Great short post that explains this so well!! Providing this info to clients is so much easier when the explanations are short, sweet and to the point. 

Jan 04, 2014 02:12 PM #27
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Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George nothing beats getting to the point in a few words, and you did it so clearly.

Have a great Sunday.

Jan 04, 2014 03:21 PM #28
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Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

KISS= keep it simple in a mortgage post is highly desirable to the average borrower George!  They can clearly get the difference..best to you!

Jan 04, 2014 08:00 PM #29
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Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

George... a great, simple-to-understand explanation for the average home buyer. But then, from you, I wouldn't have expected different! Have a great Sunday!

Jan 04, 2014 08:57 PM #30
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Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Non-conforming =  Jumbo.   That information should definitely help consumers!

Jan 04, 2014 09:23 PM #31
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Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

George, good explanation by keeping it simple and understandable.

Jan 04, 2014 10:39 PM #32
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Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

George: Good and basic description of the differences. I know that probably 95% of my loans are conforming. Thanks and be well!

 

Jan 04, 2014 11:42 PM #33
Rainmaker
738,079
Ed & Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Good Morning and this is some great Info for all,  keep up the good work and good luck in 2014,  E

Jan 04, 2014 11:44 PM #34
Rainmaker
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Ed & Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Good Morning and this is some great Info for all,  keep up the good work and good luck in 2014,  E

Jan 04, 2014 11:44 PM #35
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Ed & Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Good Morning and this is some great Info for all,  keep up the good work and good luck in 2014,  E

Jan 04, 2014 11:44 PM #36
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Basic is always good and REALTORS® have so much to remember that we should always have gratitude to folks like you that refresh our memories.

Jan 04, 2014 11:55 PM #37
Rainmaker
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Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Hi George: Was the max for a conforming loan reduced? thanks for this great information? 

Jan 04, 2014 11:57 PM #38
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Susan Jackson
America's Network Realty Group, Inc - Sandy Springs, GA

Hi George,

  I have to piggy back on Maria's question: was the max for a conforming loan reduced?   thanks

 

Jan 05, 2014 04:08 AM #39
Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

George:  Love the education post here.  I always feel the more educated and knowledgeable the client and our referral partners are, the easier and more successful our transactions together will be.  You promote success!

Gene

Jan 05, 2014 06:54 AM #40
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Anne I would love to learn more about loan programs in Canada to see the difference between the U.S. and you guys.

Silvia I deal with a lot of First Time Homebuyers, so I don't run into a lot of Jumbo loans either, but when I do I have to know what I am talking about.

Kathleen that is a wise thing to do, and I also find it easier to tell the difference between the two by referring to the Non-Conforming Loans as Jumbo's

Jimmy good point and it is easy to see why they would think that with the name being Non-Conforming.

Donna glad you think so, because that is what I tried to do.

Debbie if we have the facts we can make good decisions, so I hope this information helps.

Laura, I am sure if you Google this topic you will find a lot more information.

Janis thank you for saying that, and that was what I was trying to do.

Jennifer thank you I appreciate that.

Nina I try, so I am glad I was able to accomplish that, and did not disappoint :)

Kat, I hope so.

Michael the only way I can understand things is if they are simple, so I try to do the same when I write a blog.

Paul, most of my business is with First Time Buyers so my percentage of Conforming Loans vs Non-Conforming is probably even higher then yours.  I sure would love to do a few more of the Jumbo's :)

Thank you Ed and Tracy.

Joe we all teach each other here on AR, that is one of the great things about this community.

Maria, Fannie Mae and Freddie Mac talked about reducing the limits last year, but in November they decided to keep them the same.  I wrote a blog about it and here is the link.  http://activerain.com/blogsview/4261796/fannie-mae-freddie-mac-loan-limits-will-remain-the-same-for-2014

Susan see the response I gave to Maria in my comment just above this one.

Gene I agree, and thank you for the kind words :)

Jan 05, 2014 07:31 AM #41
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Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA
FrankRubiRealEstate.com

George great explanation on the Loan types. Thanks for sharing your knowledge. 

Jan 11, 2014 12:44 PM #42
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