Conforming vs NonConforming Mortgage

There are two general categories into which mortgages fall- conforming and non- conforming. Both are

viable loan programs, depending on the borrower's needs and qualifications.

Conforming mortgages derive thier name because they "conform" to Fannie Mae (FNMA) or Freedie

Mac (FHLMC) standards. Fannie Mae (FNMA) is a private, shareholder-owned company that works

to make sure money is available for home loans. FNMA stands for Federal National Mortgage

Association. Fannie Mae does not lean money directly to home buyers. Instead, they work with lenders

to make sure they don't run out of mortgage funds, so more people can achieve their goal of

homeownership.

Freddie Mac (FHLMC) is a stockholder-owned corporation chartered Congress in 1970 to keep money

flowing to mortgage lenders in support of homeownership. FHLMC stands for Federal Home Loan

Mortgage Corporation. Both have guidelines that must be met to obtain funding.

Non-conforming mortgage loans are entirely different. You may qualify for a
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ortgage loan through the non-conforming world even if you do not conform to the above

standards. With nonconforming loans, each lender sets their own criteria to determine eligibility.

Lenders have different "niches" they try to serve. Some may be to provide riskier loans at higher

interest rates for poor credit applicants. Others may be to offer access to more cash for those with

better credit. Some specialize in providing loans to self employed borrowers. In any case, each lender

makes their makes their own rules and they are not bound by any federal charter. This gives extreme

flexibility in the loan products they are allowed to offer.

Apart from structural differences between the companies offering each type of loan, there are major

differences in the features and benefits of the two loan categories as the chart below highlights.

Conforming

*Typically, only for customers with good credit
* Rigid standards (e.g. max of 95% rate/term & 90% with cash out)
* Fewer Programs:
- Mostly fixed rates
- A few ARMs and balloons
- Full doc only
*Strict restrictions for cash out
*Mortgage insurance for loans over 80% LTV
*No unusual Property types (no mobile homes)
*No prepayment penalties
*Automated underwriting
*Primarily rate-focused

Non-Conforming

*For customers with good or bad credit
*Much more flexible standards (e.g. 125% cash out)
*Many programs, e.g.:
- Fixed, ARMs, balloons
- 100% LTV
- Alternative income documentation
- Interest only
*Few restrictions for cash out
*No mortgage insurance (usually)
*Most property types (e.g. mobile homes)
*Prepayment penalty options to lower the rate
*Automated or manual underwriting
*Primarily benefit-focused

About this author:

Tamara is currently a loan officer with First United Mortgage out of Greenville, SC and has been in the Mortgage field not far from 2 year now. In the time that Tamara has been serving her clients she has learned alot about how to better people through helping them achieve the best mortgage for her clients. She is currently the Top Rated Loan officer for GetLoansCheap.com - A Site totally dedicated to helping people know what Mortgage Professionals are best to deal with and which are best to stay away from, among many other features the site has to offer.

She can be found at Get Loans Cheap - by going to Mortgages or just going to her home page of Tamara and seeing more info or contacting her directly there.

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