Conventional loans are known as the “plain vanilla” type of loans. Conventional loans are very popular due to the fact they are very basic, are known for lower interest rates, and can cause fewer hurdles in the process compared to an FHA or VA loan. There are also two different types of conventional loans: conforming and non-conforming loans. What’s the difference?
A conforming loan meets the guidelines that are set forth by Fannie Mae and Freddie Mac. The current maximum loan you can obtain through a conforming loan is $417,000, yet the price limit could be higher in more expensive counties. The borrower must also meet the guidelines in regard to their debt-to-income ratio and the loan must be properly documented. Conforming loans are popular because they offer lower interest rates.
However, if you don’t qualify for a conforming loan, that doesn’t mean you are not entitled to a conventional loan. Borrowers who do not qualify for a conforming loan can apply for a non-conforming loan. Non-conforming loans are not conformed to the Fannie or Freddie Mae guidelines. Usually, borrowers don’t qualify for conforming loans because of the loan to value ratio, previous credit score and history, problems documentation, the amount of debt in total already obtained, recent bankruptcy, and debt-to-income ratio would be the most common factors one wouldn’t qualify for a conforming loan.
Check out our video on conventional loans here:
Does a conventional loan sound like the perfect plan? Let a mortgage professional help you out today. Pick up the phone and dial 973-577-7008 and one of our loan officers can help you decide if a conventional loan is the best for you!