A Newly Remodeled Home

3 Things To Know About Conforming Loans

18 December 2020

Mathéo Gerard

If you are searching for a mortgage, there's a good chance that you are looking for a conventional loan. Conventional loans are easy to find and are popular for various reasons. conventional loans often offer favorable terms and maybe the best option for you if you have healthy finances. You should know that when it comes to conventional mortgages, you have two options. You can go with either a conforming loan or a non-conforming loan. Here are three things to know about the first option.

What Are Conforming Loans

When it comes to conforming loan programs, knowing what you're getting into is essential. A home loan is classified as a conforming loan if it meets a few different criteria. It must meet standards that are set by Fannie Mae or Freddie Mac. A conforming loan must also be for an amount less than a maximum set by the Federal Housing Finance Agency. It may seem a little confusing at first, but conforming loans are an excellent option for many homebuyers. 

What Are The Benefits

Now that you know what a conforming loan is, is it the right home loan for your needs? There are many benefits to going with a conforming loan. Conforming loans are easy to find and offered by many mortgage lenders. With a conforming loan, you'll often see lower interest rates than you would with other mortgage programs. This type of home loan is also easier to obtain. While a down payment of 20 percent is still something you should aim for, you can get a conforming mortgage with a lower down payment.

When Do You Need A Non-conforming Loan

While there are plenty of reasons to go with a conforming loan, there are some situations where you may need to apply for a non-conforming loan instead. There are limits to how large of a mortgage you can take out with a conforming loan. The Federal Housing Finance Agency sets the limit for conforming loans. If you want to borrow more than $548,250, you will need a non-conforming loan. If you have a low credit score or a significant amount of debt, a non-conforming loan may be a better option.

If you are searching for a mortgage, there's a good chance that a conforming loan will be the best fit. However, there are a few things to know. First, knowing how conforming loans work is vital. There are many benefits to conforming loans, and many mortgage lenders offer this type of loan. While conforming loans are a great option, there are a few situations where a non-conforming loan may be necessary. 

Share