As soon as I realized that my personal financial picture was a little bleak, I started thinking about taking out a personal loan. I wasn't really looking forward to going into debt, but I knew that if I wanted to solve a few short-term problems, a loan would be the way to go. I talked with a few of my local financial institutions to get a good idea of what they could offer me, and then I sat down to go over the paperwork. It was incredible to see how much money I could save by securing a lower interest rate. Check out my blog for more information about loans.
Do you need to get a mortgage, but have questions about what a conforming loan is? If so, you'll want to know the following answers.
What Exactly Is A Conforming Loan?
Any loan that meets the requirements to be bought by the government loan agencies Fannie Mae and Freddie Mac is considered to be a conforming loan. This gives the lender the ability to package loans and sell them to the government, which frees up capital to provide more loans to their local community.
Are All Conventional Loans Conforming Loans?
You may have some confusion about conventional and conforming loans, with both terms sometimes being used interchangeably. While all conforming loans would qualify to be a conventional loan, know that it's possible to have a conventional loan that is not conforming. This could be due to the loan not meeting any of the requirements to be considered a conforming loan.
For example, you can buy a multiunit property with up to four units as a conforming loan. If the property has five units, then it would be considered a conventional loan because it cannot be sold to Fannie Mae or Freddie Mac. This is due to the limit of a property only having between one and four units to be considered a conforming mortgage.
Are There Loan Limits?
There are limits to how much money you can borrow for a loan to be considered a conforming loan. This loan limit is different throughout the county, and varies county by county. The loan limit also changes every single year as well to keep up with property prices in the area.
If the home you are purchasing exceeds the loan limits for a conforming loan, there are a couple of options for what you can do. You can get a jumbo loan instead, which is a type of loan that is not conforming due to the higher loan value. You can also provide a larger down payment so that the loan value is beneath the conforming loan limits for your area.
Why Are The Terms Different Between Lenders For Conforming Loans?
As long as the requirements of a loan fall within the federal guidelines, the lender does have the ability to make changes to their requirements on a case by case basis. The lender can also decide to offer you mortgage terms that would make it a non conforming loan, and then they would be responsible for servicing the loan since it can't be sold to the government. This is not the same for an FHA loan, which is going to have the same requirements no matter which lender you use.
For more information on conforming loan programs, contact a lender in your area.
Share16 February 2022
