What Is The Difference Between Conforming Loans And Nonconforming Loans?
Posted on: 13 January 2022
Mortgage loans can be confusing to some people because there are many types and differences between them. For example, have you heard of conforming and non-conforming loans? If so, do you know what these are and the differences? If you want to get a home loan to buy a house, it might be helpful for you to understand these loan programs before contacting a lender. Here are the details you might want to know to help you understand them.
The Basics of Conforming Loans
The Federal Housing Finance Agency (FHFA) is an entity that regulates the home loan industry. The main thing they do is to set standards for home loans. These standards dictate the criteria for meeting the requirements for conforming loans. The criteria include the maximum amount you can borrow when buying a house, the down payment you need, and the credit score you must have. If you meet these requirements, you can get a conforming loan. If you do not meet them, you will not qualify for a conforming loan. The most common type of conforming loan program you can use is a conventional loan. Conventional loans offer some perks over other loan types, and your lender can explain these if you have questions.
The Basics of Nonconforming Loans
Nonconforming loan programs provide a way for people to get home loans when they do not meet the criteria for a conforming loan, and you can find several loan programs that fall into this category. Loans that the government backs fall into this category and include FHA loans and VA loans. Jumbo loans also fall into this category.
How to Choose the Right Type
Most people aim for conforming loans when they apply for mortgages. If they cannot get a conforming loan, they will look into a nonconforming loan. If you are unsure about which type you might qualify for, you might want to consider a few basic things. First, you can consider your credit score compared to the required credit score for a conforming loan. Next, you can consider your down payment ability. When you analyze these two things, you might see which type you can get. You can also talk to a lender to learn more about the options and what you might be eligible to get.
After reading this information, you might have an idea about the type of loan program you want to use. You can contact a lender to learn more about both types and find out if you meet the criteria.
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