With all the different options for home loans out there, it is a good idea for you to know your options before you get your hopes up, only to be let down. It is in your best interest to find a qualified individual like myself who can offer all the loans that fit your background and borrowing potential. During this research you are more than likely going to be comparing Conforming vs. Non-Conforming Loans and if you don’t know the exact definitions of these loans, then I will explain them to you in the coming paragraphs.
It is a smart idea to look at what Conforming Loans are first of all when doing your Conforming vs. Non-Conforming Loans research. Just as it says in the name of the loan, a Conforming Loan is a loan that is written to specific guidelines, and these guidelines are Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac are the two Government Sponsored Entities (GSEs) who are in charge for creating loan requirements and guidelines that lenders must follow. When you get approved for a Conforming Loan, it will meet the requirements and limits set forth by Fannie Mae and Freddie Mac. The main issue with Conforming Loans is that there are loan limits in place for the maximum amount you can spend and at the current time it is $417,000. However, this amount can vary by counties where average home prices are significantly more than the country averages. This situation is called high-cost limits for areas where housing markets can set a maximum of 115% of the median home values up to $625,500.
The other side of the Conforming vs. Non-Conforming Loans discussion is knowing what a Non-Conforming Loan is. Non-Conforming Loans are all loans that don’t abide by the Fannie Mae and Freddie Mac guidelines. There are certain reasons why a borrower may need a Non-Conforming Loan and they are as follows:
– Borrower has a FICO credit score of less than 620 (620 is the minimum Fannie Mae and Freddie mac credit score needed)
– If the borrower has limited documentation and cannot fully document employment and income
– If the borrower’s debt to income ratio is more than 45%
– If the borrower has a recent bankruptcy filing
– Borrower looking for a Jumbo Loan or loan for more than $417,000 that is not in a high-cost area
– Anyone not approved for a Conforming Loan
Given the qualifications of borrower’s looking t obtain Non-Conforming Loans, it is the assumption that if a borrower is getting this type of loan that they will either need a larger down payment or be stuck with a higher interest rate. You will find this because lenders will find the risk involved with the borrower is high and lenders will want to protect their investment.
As you can see, it is good to know your credit history and qualifications as a borrower when researching Conforming vs. Non-Conforming Loans. Don’t worry, there are plenty of loans out there for you and choosing the best one, you should leave to me and my team here at Loan Consultants. You can reach me anytime weekdays or weekend, days or nights at 888-900-1020 or inquire through my website www.loanconsultants.org.