What Is a Conforming Loan?
A conforming loan meets the requirements to be sold to Fannie Mae or Freddie Mac, the government-backed housing finance giants that buy mortgages from lenders and sell them to investors. Conforming loans must not exceed loan limits set by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
A nonconforming loan fails to meet the criteria for purchase by Fannie or Freddie. A jumbo loan, for instance, is nonconforming because it exceeds the loan limits set by the FHFA.
What are Conforming Loan Limits?
The loan limit for a conventional loan is $726,200, anything over that is considered a Jumbo Loan.
What is the credit score needed to get approved for a Conforming Mortgage?
Generally, scores range from 300 to 850. To get approved for a conventional mortgage, you’ll likely need a credit score of at least 620.
How is my Interest Rate Determined?
The interest rate you qualify for is based on the risk you present. That risk level is determined primarily by the following factors: credit scores, down payment, type of loan, mortgage insurance, or no mortgage insurance, and the current bond market.
What are the down payment requirements?
The minimum down payment for conforming loans is 3% for a borrower that has not owned a home in the last three years or 5% if they have had ownership in the last three years. If you put less than 20% down, you will be required to pay mortgage insurance
What is Mortgage Insurance and how does it work?
Mortgage insurance is an insurance policy which compensates lenders or investors in mortgage-backed securities for losses due to the default of a mortgage loan.
Mortgage Insurance is required when a borrower puts less than 20% down on a purchase or the LTV is greater than 80% on a refinance. The monthly cost of the mortgage insurance is based on the borrower’s credit score, loan amount & LTV.