Ignite FB Tracking PixelWhy Select a Conforming Loan? - Mary Kay Daughters/ Jeff Brown
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Why Select a Conforming Loan?

by Mary Kay Daughters/ Jeff Brown 10/24/2021

Image by InspiredImages from Pixabay

When you plan on getting a mortgage, you have some choices. There are conventional, FHA, VA and other options. One term you'll likely hear is a conforming or a non-conforming loan. If you aren't sure what that means, you could end up confused about the kind of loan you're actually getting for your property. To protect your investment and your finances, make sure you understand your loan type. Here's what you need to know about conforming loans.

What Are Conforming Loans?

Conforming loans are generally what most people think of as conventional or traditional loans. They're what most banks and other lenders offer to the majority of borrowers when those borrowers need a mortgage. The reason they're called conforming loans is that they meet federal guidelines for Fannie Mae and Freddie Mac. These are two agencies that buy the loans from the bank. Being able to sell the loan to one of these agencies is a benefit to the lender.

Who Can Receive a Conforming Loan?

Anyone who meets the qualifications -- and chooses a property that also qualifies -- can receive a conforming loan. Typically, to be conforming the loan has to be under a set dollar amount. For single-unit properties, for example, that limit was $484,350 as of 2019. If you want or need a mortgage bigger than that on a single-family home, you'd have to choose a nonconforming loan.

You'll also need a credit score of at least 620 (this may need to be higher based on your down payment and other factors), a debt-to-income ratio below 36 percent (or 45 percent for some loans) and private mortgage insurance if you don't have a 20 percent down payment. You'll also need to be 18 or older and have proof of income and identity.

Why Would You Choose This Loan Type?

Most people don't really choose this type of loan. It's just the one that's typically offered to them. It's the most common loan type, and it works very well for the majority of people. Lenders will often assume that this is the kind of loan you want, but there's no harm in asking them if another type of loan would be a better fit for your real estate needs.

How Can You Get This Kind of Loan?

As long as you meet the qualifications, you can get this type of loan. There aren't any special requirements, such as being a veteran or purchasing a property in a specific area of the country. Most people who apply for a conventional mortgage to buy a primary residence will have a conforming loan, because it's used most often and easier for banks to work with. Choosing this kind of loan is often easier for everyone involved.

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Mary Kay Daughters/ Jeff Brown

Thank you for visiting our website! We're the Realtor team of Mary Kay Daughters & Jeff Brown. Please be sure to look at our “Promotion Event Tab”, at top of page, for typical property marketing event examples. As members of the Greenwich, Darien & Connecticut State MLS Boards, we are your single-source Realtor team who has Shown, Listed & Sold many dream-homes, throughout Fairfield, Litchfield & New Haven Counties. 

We work hard to develop an understanding of your lifestyle & living goals to: 1). Assist you in finding & buying your dream home. 2). Estimate the market value of your home with a free Comparative Market Analysis (CMA), in order to sell your home. When Buying, we make your home search fun and keep your property information organized. When Selling, we use special marketing techniques and as a professional photographer, act as your personal public relations property promoter! 

Whether you're in the beginning of your real estate search or, you know exactly what you're looking for, or you want to sell, you'll benefit from our experience and area knowledge. Call, Email or Text us anytime! We would be honored to put our real estate experience to work, for you!