If you start looking for a mortgage loan, you should not feel surprised if you experience a lot of confusion. With so many different loan packages available, how do you understand the differences with them and how do you pick the right one? One loan program you might encounter as you search for a loan is a conforming loan. If you do not know what this is, read on to learn the following four facts about conforming loans.
1. The Basic Guidelines for Conforming Loan Programs
Loans that fall into the conforming loan category must meet the requirements set by two government entities: Freddie Mac and Fannie Mae. These entities create guidelines and rules that lenders must follow when issuing loans. The purpose of these guidelines is to protect lenders when issuing loans and to ensure that borrowers can repay their loans.
2. There Is a Maximum Loan Amount Rule
The second fact to know about conforming loans is that there is a maximum amount you can borrow with one. This amount changes every few years, but it is vital to know if you are considering buying a luxury home. The amount for 2020 is $510,400. This limit tells you that you cannot borrow more than this amount to buy a house with a conforming loan. If you want to purchase a higher-priced home than this, you will need to examine other loan programs.
3. They Offer Competitive Terms
Because people cannot get approved for conforming loans unless they meet the criteria, these loans offer benefits. The primary benefit is competitive terms. If you meet the eligibility requirements for a conforming loan, you will likely have a lower interest rate on your mortgage than other loan types. You might also have fewer fees to pay.
4. You Can Qualify Without Perfect Credit
The last fact to know about conforming loans is that they do not require perfect credit. While the government entities that control the loan guidelines have criteria for credit scores, lenders have flexibility with the loans they issue. If you do not have perfect credit, you might still qualify for a conforming loan. It might be helpful to find out the credit score requirements before applying, though.
If you have questions about conforming loan programs or other types of loan options, call a mortgage lender. A lender can guide you and assist you when you need a loan.Share