Conventional Loan Programs
Conventional loan programs are a type of mortgage loan that is not guaranteed or insured by a government agency. Instead, conventional loans are backed by private lenders, such as banks and mortgage companies, who assume the risk of lending money to borrowers.
Conventional loans typically have stricter eligibility requirements than government-backed loans, including higher credit score and income requirements, as well as a larger down payment. However, they also offer more flexibility in terms of loan amounts and property types.
There are two main types of conventional loan programs: conforming and non-conforming loans.
Conforming loans: These are conventional loans that meet the loan limits set by the Federal Housing Finance Agency (FHFA). These loan limits are reviewed annually and are based on median home prices in a given area.In 2023, the conforming loan limit for a single-family home is $726,200 in most areas of the United States. Conforming loans typically have lower interest rates and more favorable terms than non-conforming loans.
Non-conforming loans: These are conventional loans that exceed the loan limits set by the FHFA or do not meet other eligibility requirements, such as debt-to-income ratios or credit scores. Non-conforming loans are also known as jumbo loans and are typically used to finance high-end properties or for borrowers with significant assets but limited income documentation. Non-conforming loans may have higher interest rates and stricter eligibility requirements than conforming loans.