When you’re looking at loan types, you may have come across the descriptor of conforming or conventional.
This term might not make a lot of sense if you don’t know a ton about mortgage loans.
To put it simply, conforming mortgage loan types are ones that are not backed by the government in any way.
Instead, they follow the standards set forward by Fannie Mae and Freddie Mac.
If a conforming mortgage loan sounds like something you would be really interested in, then take some time to check out the pros and cons of the loan type, the answers to some common questions, and the loan limits for this kind of loan.
If you are looking at multiple loan types and you aren’t sure which kind of loan is really going to be the best for you, then check out the reasons why the conforming mortgage loan might be perfect for you.
Here's a quick rundown of our list:
- Conforming Loan Types
- How to Qualify
- What Homes Can Be Purchased with this Loan
- The Downsides to this Loan
And if there are any questions that you still have, then you can always contact me and I’ll help make sure that you’re on the right road to owning a home in San Diego.
Conforming Loan Types
When it comes to the conforming loan, there are actually a number of loans that fit into this category.
This means quite a lot for people that are looking for loans will be able to find something that works.
There are a couple of misconceptions about conforming loan types that are floating around out there.
Some people believe that the lack of backing from the government makes these loans less useful, but that isn’t the case.
There aren't many major differences between loans that are offered and backed by government agencies and loans that conform to Fannie Mae and Freddie Mac standards.
Some people also believe that there is a ridiculously high down payment required in order to get a home with a conforming loan.
However, that simply isn’t true either.
There are the 97% loan and the HomeReady loan that both have a 3% down payment.
The piggyback loan type also has a 10% down payment and is extremely useful.
Between Freddie Mac and Fannie Mae, they even have similar loan types.
This means that even if you’re looking at the conforming loan type, you’ll be able to find something that will fit your budget and your lifestyle.
How to Qualify
When it comes to getting a conforming loan, the exact qualifications that you need will depend on each specific loan type that you are looking at.
However, there are a couple things that you will need to know in general before you start applying.
There is a misconception that these loans are much harder to qualify for than any of the other loan types that exist in the US.
However, that isn’t really true.
You will need to have a lot of the same information that other loan types will need such as forms about your income and credit history.
While these loans will have higher standards that have to be adhered to, they are not that much more difficult than the other loan types that are out there.
The credit score that you need will be a little bit higher.
While you can get many loans with a credit score of 620, you’ll find that it gets so much easier to qualify when you have a higher credit score.
The credit score can really show that you’re good at handling money and paying off debts as you accumulate them.
Because there is no government backing, they have to be a little bit pickier when they’re getting these loans ready for people.
However, even though they are difficult to qualify for, they can still be incredibly helpful for people that are trying to get everything together.
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What Homes Can Be Purchased with this Loan
The kinds of homes that you’re going to be able to purchase is really going to depend on the specific loan.
Most of the time, these loan types will cover a 1-unit home with the $510,400 loan limit that is used across all Freddie Mac and Fannie Mae loans.
With some loans, you will be able to purchase 2- to 4-unit homes as well.
And many of these loans will also cover getting a condo.
This means that you’ll be fairly flexible with the kind of home that you are going to get.
You may find some issues getting a second home or a vacation loan depending on the exact loan type that you have.
However, many of the people want this kind of loan type are those that are getting a home for the first time, so they won’t be too worried about the clauses about second homes or vacation homes.
The Downsides to this Loan
We’ve already covered that the qualifiers for this loan are a little stricter than other loans that are backed by the government.
This does make it a little bit harder for people that are struggling with student debt or other debts and need to get a home.
You will also find that this loan type has quite a bit of PMI.
The insurance is something you see on many loan types, regardless of backing.
However, it takes quite a bit of money down to get rid of the PMI on this particular loan type.
So unless you can get 20% of the loan ready, you’ll have to deal with the PMI for the loan.
Some loan types, like the piggyback loan, work around that restriction, but they are also some of the most difficult to get into.
If you find yourself interested in learning more, then you’ll want to check out our main article, the pros and cons about the loan, the answers to the most common questions about this loan type, 5 reasons why, and more information about the loan limits that are available with this loan.
What do you think?
I would love to hear your comments below - or cal/text me at (760) 297-4539.
Your Conforming Loan Insider,
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