Understanding Conventional Vs. Conforming Mortgage Loans

People lining themselves up for home buying or even current homeowners who have not taken mortgage in a number of years, with all the different programs available in the marketplace today; Government Loans, Conventional Loans, Conforming Loans, it can be easy to get lost in the array of available programs.

All mortgage loan programs breakdown under the hub of Conforming Loans

Conforming Loans-refer to the loan size meeting the category of a Conforming Loan for the area in which the property is located.

For our purposes will be looking at single family residences-one unit properties.

California Conforming Loans go to $417,000-each county however, has a different Conforming High Balance Loan Limits for example in Sonoma County, California the maximum Conforming High Balance Loan Limit through December 31, 2013 is $520,950. Loan amounts exceeding this figure are considered Jumbo Mortgages (terms and rates slightly less competitive due to smaller market)

Conforming Loans encompass each major loan program:

  • Conventional Loans-Conventional
  • FHA Loans-Government
  • VA Loans-Government
  • USDA Loans-Government
  • Home Path Loans-Conventional
  • Harp 2 Refinance Loans-Conventional

Conforming Loans also encompass the standard loan terms many are already familiar with:

  • 30 year fixed
  • 25 year fixed
  • 20 year fixed
  • 15 year fixed
  • 10 year fixed
  • 3, 5,7,10 adjustable rate mortgages

So the term “Conforming” is used mainly for describing the size of the loan, so Conventional Loans, represent a mortgage loan program?

That is accurate.

Conventional Loans are your standard non-government mortgages. In fact in today’s mortgage lending world, there is really only two loan programs available to consumers buying or refinancing a house, Conventional or Government. Put another way, you cannot have a Conventional FHA Mortgage since FHA falls under the government hub and Government Programs always “Insured,” or “Guaranteed” by an entity.

You can have a Conforming FHA mortgage, but if you’re seeking an FHA mortgage, it’s likely already in the Conforming Loan Limits for your given area.

Unique separator between Conventional Loans and Government Loans

Conventional Loans- are the most sought-after types of mortgage financing available, by the same token, qualifying for Conventional Financing is more strict than Government Financing. Unlike Government Mortgages conventional loans are not guaranteed by or insured by a government agency such as the Federal Housing Administration or Department of Veterans Affairs or US Department of Agriculture. Conventional loans are backed directly by Fannie Mae and Freddie Mac who have specific underwriting criteria lenders are required to abide by in the origination of the loan thus making them …the cream ream of the crop.

Now, being armed with the subtle differences in the mortgage program arena, you can make better comparisons on loan amounts, loan programs and mortgage rates with each comparison quote you receive.

 

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