Conforming loans usually offer lower interest rates and lower fees

Conforming loans usually offer lower interest rates and lower fees. Most home buyers want a conforming loan because they are often easier to qualify for a mortgage, they have lower mortgage interest rates, and require a lower down payment.

Non-conforming loans are loans that are above the conforming loan limit also known as “jumbo” loans. The terms and conditions of nonconforming mortgages vary from lender to lender. These loans have a higher interest rate, require at least 20% down payment and have stricter qualifying criteria.

Conforming loans are conventional loans that meet bank-funding criteria set by Fannie Mae (FNMA) and Freddie Mac (FHLMC). Both of these stock-holding companies buy mortgage loans from lending institutions and secure them for resale to the investment community. Every year, from October to October, Fannie Mae and Freddie Mac establish limits on what constitutes a conforming loan in a mean home price.

Buying back mortgage loans allow these agencies to provide a continuous flow of affordable funding to banks that reinvest their money back into more mortgage loans. Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market – effectively decreasing the demand for non-conforming loans.

Conforming Loan Limits:

Units Contiguous States, District of Columbia, and Puerto Rico Alaska, Guam, Hawaii, and U.S. Virgin Islands
1 $424,100 $636,150
2 $543,000 $814,500
3 $656,350 $984,525
4 $815,650 $1,223,475

NOTE: The conforming loan limit in Alaska, Hawaii, Guam and the Virgin Islands is 50% higher.

For more information, contact us at 406-294-7207 or info@divisionmortgagegroup.com
or visit us at our downtown Billings location at 1320 Division Street, Billings, MT 59101.

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These materials are not from HUD or FHA and were not approved by HUD or a government agency.