Know your options

Learn more about all the Loan Options that are available to you, the pros and cons of each, and their mechanics.

Conforming Loans vs Non-Conforming Loans

A conforming loan refers to a conventional mortgage that can be purchased by Fannie Mae or Freddie Mac. For one of these institutions to purchase the mortgage from your lender, the loan must meet basic qualifications set by the Federal Housing Finance Agency (FHFA). These loan requirements include the following:    

Conforming Loans Requirements

Conforming loans have well-defined guidelines and there’s less variation in who qualifies for a loan. Because the lender can sell the loan to Fannie or Freddie, conforming loans are also less risky. This means that you may be able to get a lower interest rate when you choose a conforming loan.

Meets lender-specific criteria: Your loan must meet the lender’s specific criteria to qualify for a conforming mortgage. For example, you must have a credit score of at least 620 to qualify for a conforming loan. You may also need to take property guidelines and income limits into account when you apply for a conforming loan. A Home Loan Expert can help determine if you qualify based on your unique financial situation.

Below the maximum dollar limit: The maximum dollar limit in most parts of the contiguous United States is $647,200 in 2022. In Alaska, Hawaii and certain high-cost areas, the limit is $970,800. Higher limits also apply if you buy a multifamily unit. Your lender can’t sell your loan to Fannie or Freddie and you can’t get a conforming mortgage if your loan is more than the maximum amount, unless you qualify for a super-conforming loan.

Not a federally backed loan: The loan can’t already have backing from a federal government entity. Some government bodies (including the Department of Veterans Affairs and the Federal Housing Administration) offer insurance on home loans. If you have a government-backed loan, Fannie and Freddie may not buy your mortgage.

Non-Conforming Loans

If your loan doesn’t meet conforming standards, it’s considered a non-conforming loan. Non-conforming loans have less strict guidelines than conforming loans. These loans can allow you to borrow with a lower credit score, take out a larger loan or get a loan with no money down. You may even be able to get a non-conforming loan if you have a negative item on your credit report, like a bankruptcy. Most non-conforming loans will be government-backed loans or jumbo mortgages.

Non Government Backed Mortgages

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Conventional Mortgage

Conventional mortgages are the most common type of mortgage. That said, conventional loans do have stricter regulations on your credit score and your debt-to-income (DTI) ratio.

Fixed-Rate Mortgage

A fixed-rate mortgage has the same interest rate and principal/interest payment throughout the duration of the loan.

Adjustable-Rate Mortgages

The opposite of a fixed-rate mortgage is an adjustable-rate mortgage (ARM). ARMs are 30-year loans with interest rates that change depending on how market rates move.

Government-Backed Loans

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USDA Loans

USDA loans are insured by the United States Department of Agriculture. USDA loans have lower mortgage insurance requirements than FHA loans and can allow you to buy a home with no money down. You must meet income requirements and buy a home in a suburban or rural area in order to qualify for a USDA loan.

VA Loans

VA loans are insured by the Department of Veterans Affairs. A VA loan can allow you to buy a home with $0 down and lower interest rates than most other types of loans. You must meet service requirements in the Armed Forces or National Guard to qualify for a VA loan.

Jumbo Loans

A jumbo loan is one that’s worth more than conforming loan standards in your area. You usually need a jumbo loan if you want to buy a high-value property.

FHA Loans

FHA loans are insured by the Federal Housing Administration. An FHA loan can allow you to buy a home with a credit score as low as 580 and a down payment of 3.5%. With an FHA loan, you may be able to buy a home with a credit score as low as 500, if you pay at least 10% down.

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