What Are The Benefits Of Conforming Loan Programs?
A conforming loan is a loan that meets the Federal Housing Finance Agency's financing limits and Fannie Mae and Freddie Mac underwriting guidelines. Non-conforming loans, typically called jumbo loans, are those that do not meet these requirements, typically because of the price of the home. If you are in the market for a new home loan, you may wonder what the benefits of conforming loan programs are compared to non-conforming loan programs. Here are a few of these benefits.
They Are Traditionally Easier to Qualify For
One of the benefits associated with conforming loan programs is that they are traditionally easier to get approved for. Many people who seek out and qualify for conforming loan programs are first-time home buyers. They have loan limits, which may limit the types of buyers who seek out this type of loan program. However, due to the lower loan limits, more people are able to get approved for a conforming loan compared to non-conforming loans.
They Allow for Lower Down Payments
Non-conforming loans typically require a 20 percent down payment. This can be a lot on a large home loan, and not everyone has that type of money, especially first-time home buyers. Conforming loan programs allow for down payment assistance programs, grants, and loans and may allow those who have almost nothing down to qualify for a loan.
They Tend to Offer Lower Interest Rates
The final benefit of a conforming loan program is that they typically have much lower interest rates compared to non-conforming loans. Non-conforming loans are typically riskier as they are often higher loan amounts. A small interest rate difference between loan products may not seem like a huge deal, but when you have a loan for hundreds of thousands of dollars over the course of multiple decades, even a quarter or half percentage difference can add up quickly. The lower interest rate is a huge benefit.
When you are looking to obtain a mortgage, you should always sit down with a mortgage loan specialist, also called a home loan specialist. A great loan specialist can go over the various types of loan programs that are out there, including conforming and non-conforming loan products, and help you figure out which type of loan is ideal for your situation and why. Contact a mortgage loan specialist today to begin the process of learning about various loan programs and pre-qualifying for a home loan.