Get to Know Your Loans

Conforming loans meet the requirements to be sold to either one of the two largest mortgage buyers within the United States, Fannie Mae or Freddie Mac. Conforming loans will also likely be the cheaper option between the two loans, as well. While conforming loans are the most common option, there are limits on the size of the loan. Typically, conforming loans are limited to around *$550,000 in most areas.

*Pricing may vary.

Non-conforming loans do not meet the Fannie Mae and/or Freddie Mac guidelines to be purchased, and therefore are not eligible to either mortgage buyer. Non-conforming loans are more likely to be costly in comparison to conforming loans and are less common. However, non-conforming loans offer options without price or loan size limitations.

Jumbo loans, also referred to as jumbo mortgages, are similar to conforming loans, as both meet the guidelines needed to be eligible for Fannie Mae and Freddie Mac purchasing. However, the key difference between the two loans falls within the loan size limitations. Jumbo loans exceed the limits that are set for conforming loans.

Private money loans are granted and provided by private money lenders, as an alternative to traditional financial lenders and institutions such as banks and credit unions. These loans are typically short-term and are used for the purchasing and/or refinancing of a borrower’s real estate property.

Down-payment assistance loan programs are offered to home buyers to assist in reducing the amount needed to be saved for a down payment on a potential property. Upon qualification for the program, payments in the form of grants or low-interest loans are given to cover the cost of a down payment. Some down-payment assistance loans can also be used to cover the costs of closing as well.

A fixed-rate mortgage has a set interest rate for the entire duration of the length of the loan. The interest rate does not change throughout the loan term and allows homeowners to more easily budget for monthly payments. Choosing a fixed-rate mortgage also provides homeowners more protection from unpredicted rate changes.

Adjustable-rate mortgages can be set below the current market rate for comparable fixed-rate loans. An adjustable-rate mortgage will either increase or decrease over time and is generally more complicated than fixed-rate offers. This allows the new homeowner to save on monthly payments for at least the first three to seven years, however, the monthly amounts are susceptible to change.

Federal Housing Administration loans are insured mortgages that are backed by the government. These loans typically have lower minimum credit score requirements and accept lower down payments than other loans that are offered. FHA loans are good matches for first-time homeowners and those looking for budget-friendly options.

United States Department of Agriculture loans are government-backed mortgages insured by the Rural Housing Service agency, assisting homeowners with very low to moderate incomes. USDA loans allow low-income homeowners more affordable low-interest mortgage options with little to no down payments.

Veterans Affairs loans are government-backed with no down payment available to Veterans, Reserve and National Guard members (called to active duty), active duty Servicemembers, current Reserve and Guard members (after six years of creditable service), and certain surviving spouses.