What is a conforming mortgage loan?


A conforming mortgage loan meets the guidelines of U.S. government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. Those two have developed a uniform set of mortgage rules to standardize nationwide mortgage documents and underwriting criteria for a mortgage loan.

Conforming mortgage loans are underwritten under the high standards of Fannie Mae and Freddie Mac, two semi-government entities, as loans are grouped in mortgage pools and sold as mortgage-backed securities (MBS) to investors on the secondary mortgage market.

Interest rates on conforming mortgage loans are lower.

You have probably noticed that interest rates on conforming mortgages are at least ¼ to ½ lower than on jumbo loans. Also, if you have changed jobs in the last several years or your credit is average to low, you may find it easier to get a loan from a portfolio lender. That is, a lender who is not selling their mortgages on the secondary market on a regular basis.

However, rates with such a lender will be higher - these can be subprime or bad credit lenders, as well.

Before you approach s bad credit lender, you are advised to check different other sources. You could be eligible for a loan with better terms with the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA) or the Rural Housing Service (RHS). Also, your state and/or county probably have developed some sort of housing assistance programs you might be eligible for.

In general, you may want to check one of those, if you are afraid you won't qualify under the stricter conforming loan guidelines before you approach an online lender with untraceable history, or a subprime lender.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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