complete guide
to conventional loans
Conventional loans are further classified into:
Conforming Loans
After half of mortgage loans in the U.S. are bought by Fannie Mae and Freddie Mac, the biggest two government sponsored entities (GSE). In order to be marketable to those GSEs, conventional loan lenders have to conform to Fannie Mae and/or Freddie Mac guidelines. Thus, those conventional loans are called conforming loans. Current loan limit for single family residence is $417,000. For certain high-cost areas, loan limits may be allowed to a higher amount. Those are called high balance loans.
Non Conforming Loans
Those mortgage loans that are not conforming to GSE guidelines are known as non-conforming home loans.
Jumbo Loans
Those mortgages with higher loan amounts than the GSE loan limits are known as jumbo home loans.
Portfolio Loans
Majority of home loans originated by mortgage lenders are sold to investors in secondary market. Some lending institutions, however, keep certain loans in their own investment portfolio. So, those loans don’t have to follow those GSE or other investors’ guidelines. Those loans are called portfolio loans.
Alt-QM Loans
Some lenders market their loan products to borrowers with lower FICO score or spotted employment history. Those loans often comes with higher fees and/or interest rates.
Pros & Cons of Conventional Loans
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