What Is The Difference Between A Conforming & Non-Conforming Mortgage?
Many buyers hear the terms conforming and non-comforming loan as well as a jumbo loan and don't really understand the implications. Hopefully, all Realtors do, but if not, here's a great explanation, courtesy of George Souto:
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. So What Is The Difference Between A Conforming & 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 the loan amount is over $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 meet which Non-Conforming Loans don't. The guidelines for Non-Conforming are usually lender specific. 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 guidelines which Conforming Loans have to meet, but are more lender specific for Non-Conforming loans are:
- Debt-To-Income.
- Down Payment
- 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 these are the most common.
This is as basic as I can get in answering the question What Is The Difference Between A Conforming & 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 Non-Conforming Loan, so when you hear these terms you have a basic idea of what is being referred to.
******************************************************************************
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
Comments(9)