CONFORMING MORTGAGE VS. NON-CONFORMING MORTGAGE

Conventional mortgages are either conforming or non-conforming, conforming meeting the standards introduced by government-back Fannie Mae (FN
MA) and Freddie Mac (FHLMC).

As both terms are very different, take care not to confound with conforming and conventional. However, neither are considered government loans.

One important variable that determines whether a mortgage is conforming is the amount of the loan. Loans over the maximum conforming loan limit are
called jumbo loans and typically will have a higher rate consequently. Nevertheless, both kinds of loans are conventional.

Other types of non-conforming loans include those made to borrowers with high debt, bad credit or bankruptcy in the recent past, or on homes with a
high loan-to-value (LTV).

Three other alternatives, USDA, VA and FHA mortgages, are backed by the federal government. Loans guaranteed by the Federal Housing Administration
(FHA) aim to make buying homes more affordable for low to mid-income families by offering low down payments. VA loans are guaranteed by the U.S

Department of Veterans Affairs and are accessible to active military, veterans, and surviving spouses only.

Conventional loans, however, are offered by private entities like banks, credit unions, private lenders or savings institutions. Since they’re not guaranteed
by the government in the event the buyer defaults the risk is increased to the lender and that is usually reflected in a slightly higher interest rate.

CONVENTIONAL LOANS AND DOWN PAYMENTS GIFTS

It’s possible for you to utilize a gift from a relative or eligible nonprofit service to cover loan closing costs and your entire down payment.