As you prepare to apply for a mortgage you may hear things about conventional vs. non conventional mortgages and conforming vs. non conforming. These terms can be confusing at first especially because non conforming can sound like a negative when in fact, these are just different types of loans with different requirements.
Conventional – A conventional loan is a conforming or non conforming loan that you obtain through a lender.
Non-Conventional – A non conventional loan is insured by a government sponsored program. This includes VA loans, FHA and USDA.
At Title Mortgage our team helps our clients obtain the type of loan that makes the most sense for their circumstances. We will help one client with a VA home loan and then help another get a conventional loan. We have the flexibility to help you find the loan program that best suits your needs.
If you do end up going with a conventional loan you still need to consider if you will have a conforming loan or a non conforming loan. One big factor that helps determine if you can get a conforming loan is the amount that you intend to borrow. There are conforming loan limits that have been set to define a conforming loan. If you are buying a home that requires you to borrow more then $417,000 then you will need a non conforming loan called a Jumbo Loan.
The big difference between a non conforming loan and a conforming loan is that a conforming loan can be purchased by Fannie Mae or Freddie Mac. A non conforming loan cannot. In addition to the conforming loan limit, there are some other things that might result in the need for a non conforming loan.
- Condos With Low Owner Occupancy – When a condo unit is heavily owned by investors it will have a low owner occupancy rate. This makes the condo building unwarrantable which means the loan on the units cannot be sold to Fannie Mae or Freddie Mac.
- Low Down Payment – When a borrower doesn’t have the full 20% down payment, they will have to explore their options and may end up with a non conforming loan. However Fannie Mae does have some options for those with a low down payment that may work. You won’t know for sure until you sit down with your loan officer and discuss your options.
- Credit Score – If you have a lower credit score you may have to get a non conforming loan. You can also consider a non conventional option such as an FHA loan in this case.
Title Mortgage is uniquely positioned with several local community bank lenders to offer many non-conforming loan products to accommodate a diverse range of loan scenarios.
Our loan programs include:
- Jumbo Loans
- Imperfect Credit Loans
- Unique Properties
- Construction Loans
Ultimately you won’t know what type of loan will work best for you until you meet with a loan officer and review all of your documentation together. Although it is not required, it is helpful have all of your required documentation pulled together before you meet and keep an open mind. Some borrowers are convinced a FHA home loan is what they want but after meeting with their loan officer they find a program that is a better fit. We pride ourselves on finding you a loan program that makes sense for you.