Conforming Loans Vs. Nonconforming Loans—What’s The Difference?

Conforming Vs Non Conforming Loans

If you’re a first-time homebuyer, you may wonder about the difference between conforming and non-conforming loans. Blackmon Home Loans is here to help you clarify the conclusion and make an informed decision.

What Is A Conforming Loan?

These satisfy the requirements of the United States federally backed home mortgage companies: Fannie Mae and Freddie Mac. A type of conventional loan, conforming loans are the most common type available today.

Conforming Loan Requirements, Pros & Cons

They must meet certain requirements regarding credit score, debt-to-income ratio, loan-to-value ratio, and minimum down payment. They can be more difficult to qualify for than nonconforming loans and come with firm limits set by the Federal Housing Finance Agency (FHFA). For eligible home buyers and lenders, they come with many benefits.

  • More liquidity For Lenders
  • Clear Qualifying Requirements
  • Less Risk For Lenders & Home Buyers
  • Expanded Disclosures
  • Lower Fees & Rates
  • Longer Terms

When Should You Choose This Type?

If you meet the lender requirements and your desired amount is less than the annual limit set by the FHFA, it may be appropriate for you.

What Is A Non-Conforming Loan?

In simple terms, they are those which don’t meet Fannie Mae and Freddie Mac standards. They comprise many types, including FHA, subprime, and jumbo, or those that exceed the limits necessary to qualify for one backed by a federally backed home mortgage company.

Non-Conforming Loan Requirements, Pros & Cons

The non-conforming variety also has specific requirements, ranging from lender to lender in type and time. They can often be riskier with higher interest rates that will cost you more over time. Additionally, certain non-conforming loans can be harder to qualify for. However, they do have some benefits.

  • More Flexible Terms
  • Larger Limits
  • More Purchasing/Property Options
  • Credit Leniency
  • Flexible Income Verification
  • Lower Down Payments

When Should You Choose This Type?

A non-conforming loan may make the most sense if you cannot meet the requirements for a conforming variety or if the property you want to buy exceeds the FHFA limit.

Is A Conforming Or Non-Conforming Loan Best?

Ultimately, there’s no right or wrong answer when choosing between these two types when buying a house. Instead, it depends on your unique situation and goals.

Let Us Help You Get Started Today

Working with the right mortgage company can make all the difference. If you’re buying a house for the first time in the Las Vegas area, Blackmon Home Loans is eager to help with all of your mortgage and home loan needs. Contact us today to get started.

Scroll to Top