In a recent post, we discussed the difference between conventional and conforming loans. In this post, we will talk about the difference between a conforming loan and a non-conforming loan, also called a “jumbo” loan.
What is a Conforming Loan?
A conforming loan is a mortgage that conforms to the loan limits for Fannie Mae and Freddie Mac. These limits are set for each county individually.
What is a Jumbo Loan?
A jumbo mortgage is a home loan that exceeds the Fannie Mae and Freddie Mac loan limits. This is the type of mortgage you apply for if you must borrow more than Fannie Mae and Freddie Mac allow for conforming loans.
Key Differences Between Conforming and Jumbo Loans
- Credit score and DTI requirements are more strict if you apply for a jumbo loan. Whether you are applying for a jumbo loan or a conforming loan, there will be an assessment of your credit score and debt-to-income (DTI) ratio. While these assessments are similar, to qualify for a jumbo loan, your credit score will need to be higher and your DTI ratio will need to be lower.
- A higher down payment is expected for a jumbo mortgage. For conforming and non-conforming loans alike, you need to put down money when you purchase a home. But you can expect a higher down payment requirement for a jumbo loan then you would need for a conforming loan.
- You may need two appraisals for a jumbo loan. When applying for a conforming mortgage, a single appraisal is generally all that is required to buy a home. But with a jumbo mortgage, you may need two instead of just one.
- Closing costs for a jumbo loan may be higher than for a conforming loan. One thing that can catch you off guard when applying for a jumbo loan is the closing costs. Like the down payment, the closing costs for a jumbo mortgage may be higher than those for a conforming loan. You will need to take this into account when you are deciding what type of mortgage to apply for. Make sure that you can afford all the upfront costs that go with a jumbo loan.
- Rates for jumbo loans and conforming loans can be similar. Something else about jumbo mortgages that surprises some applicants is that the interest rates for them can be right in line with those for conforming loans. They are not always higher. In fact, with the right qualifications, you may find a jumbo loan is very affordable.
Apply for a Conforming or Non-Conforming Loan in Miami
Now you know some of the ways in which conforming and non-conforming loans are similar and different.
Have more questions about jumbo and conforming mortgages, or not sure which type to apply for? We can help you out with these questions during your consultation. To schedule your consult now, please call Lending Bankers Mortgage at (786) 220-1100. Let’s match you with the ideal type of home loan in Florida.