Conforming vs Non-Conforming Loans

Mortgage and Lending with JB Mortgage Capital, Inc. NMLS# 247447

If you are in the market to purchase a home then you should adhere to a few important aspects when searching for the right mortgage lender. Perhaps the most important thing is to chose a lender you can trust. One that has a great reputation and a long history of providing great loans to homebuyers.

Part of process in chosing the right mortgage company is making sure the Loan Officer you're working with is experienced, knowledgeable and trust worthy. Someone who will take the time to answer your questions so that you can be better educated as to the process of obtaining a mortgage.

A true mortgage professional will not only provide a low mortgage rate but also provide a high level of client focused service. Two common home loan types to determine choosing the best loan product to meet home buying needs: Conforming vs. Non-Conforming loans

Conforming Loans:

Fannie Mae and Freddie Mac back conforming loans.

Conforming loans generally come with reduced interest rates (when compared to non-conforming loans) and offer smaller down payment options. Also there are few less stringent financial conditions to be met by the borrower for approval (be sure to discuss these details further with your Loan Officer).

When it comes to buying a home; especially those looking to purchase their first how, the Conforming loan programs offer a lot options. Not all mortgage loan programs are the same and different programs have different guidelines but when it comes to Conforming loans it's bit more standardized than Non-Conforming loans. This makes it easier on both the homebuyer and the Loan Officer.

The great things about Conforming loans is that you have the option to put down as little as 3%. So if you are buying a $400,000 home you'll only need $12,000 for the down payment.

The important thing to remember with Conforming loans is that there are loan limits that you can't go above. The base Conforming loan amount for 2020 is $510,400. If the  property comes with multiple units, then loan limits are as follows:

$653,550: 2 unit properties maximum loan amount

$789,950: 3 unit properties maximum loan amount

$981,700: 4 unit properties maximum loan amount

About Non-Conforming Loans:

A Non-Conforming loan is any mortgage loan that does not conform to the loan limits and guidelines set forth by Fannie Mae and Freddie Mac.

When choosing the right mortgage loan for you it's important to evaluate all your options. And when it comes to Non-Conforming loans there are a few things you should know. Underwriting guidelines for most Non-Conforming loans can vary from mortgage lender to mortgage lender. Things like credit score requirements, Debt-To-Income ratio and Loan-To-Value ratio requirements are different from one loan program to the next.

Another important thing you should know is that Non-Conforming loans can sometimes take longer to process and at times require more documentation. Now there are some Non-Conforming loans that are fairly easy to obtain but there are also many more Non-Conforming loans that require significantly more documentation than your average Conforming Loan program. In addition to this it does take an underwriter more time to underwrite a Non-Conforming loan because the guidelines are not standard (like they are with Conforming loans).

So it's essential that you work with a Loan Officer that had a good understanding of what is required with each program.


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Kevin O'Connor

Helping Homeowners Achieve Their Dreams.
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