Conventional Loans
Conventional loans are loans that are not part of a Government Program. Conventional loans cost less but have more rigid qualifying guidelines. Conventional loans can be broken down into two different categories; Conforming and Non-Conforming.
Conforming loans have maximum loan amounts that are set by the government and follow other guidelines set by Fannie Mae and Freddie Mac. They tend to be more difficult to qualify for, but because they are less risky for the lender, the rates are often lower.
Non-Conforming loans are loans that do not meet Fannie Mae and Freddie Mac’s standards for purchase. There are a few different types of non-conforming loans. Government backed loans are non-conforming loans that are insured by the federal government. If a borrower defaults on payments the government will pay the bill and because of this, lenders can offer loans to the borrower with lower down payments and credit scores. The most frequently originated government loans include VA Loans, USDA Loans and FHA loans. Jumbo loans are also considered non-conforming loans because they exceed the conforming loan limit set by US regulation. (These rates vary by county).
