Conventional Home Mortgages

There are two types of home mortgage (residential) loans:

Conforming Mortgage Loans

This is a loan that fits (or conforms) into the specific loan limits set by the Federal National Mortgage Association (more commonly known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as Freddie Mac). Both are public government-sponsored enterprises (although Fannie Mae is a publicly traded company) and they exist to help borrowers keep housing costs low.

As for conforming loan guidelines, in general they are:

• A loan limit of $417,000.
• Income documentation and asset verification required.
• Minimum down payment of 5 percent is required.
• If LTV exceeds 80 percent, mortgage insurance will be required
• These loans usually – although not always – have better pricing than do Jumbo Loans.

Jumbo Mortgage Loans:

The second type of residential loan is what is known as a Jumbo Loan (also called a non-conforming loan). This type of loan is one that can exceed a conforming loan’s limits and/or one that uses different guidelines.

A Jumbo Loan typically is priced higher than a conforming loan, but it offers borrowers the ability to borrow higher amounts (as much as $2 million), depending on the size of the property you’re considering.

A Jumbo Loan also may offer more flexible guidelines.