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Conforming Loans
A loan that conforms to the guidelines
established by Fannie Mae or Freddie Mac. These guidelines
establish the maximum loan amount, down payment, borrower credit & income requirements,
and suitable properties. Lenders that make loans established to these
guidelines may sell those loans to Fannie Mae or Freddie Mac. These lenders may
retain the servicing on these loans - so that a borrower will continue to make
payments to the original lender.
Every year, new loan limits are announced for one- to four-family loans
As of January 1, 2005 the new conforming limits are:
One
Family |
Two
Family |
Three
Family |
Four
Family |
| $359,650 |
$460,400 |
$556,500 |
$691,600 |
Non-conforming Loans, also called Jumbo Loans
A loan that does not conform to the guidelines established by Fannie Mae
or Freddie Mac is called a non-conforming loan. A loan that is "higher"
than the conforming loan limit is called a Jumbo loan. Loans that do not
meet the credit quality of conforming loans ('A' paper) are called 'B','C'
and 'D' paper loans. Second mortgage loans - credit lines, home equity
loans, home improvement loans are also non-conforming loans.
Portfolio Loans
Loans may be sold on the secondary market to Fannie Mae, Freddie Mac or a
select number of conduits (e.g. GE Capital) or they may be kept in the banks
portfolio. Portfolio loans may have more flexible qualifying criteria, while
saleable loans have to meet an investors criteria.
Commercial Loans
Loans programs discussed above are for 1-4 unit residential properties. For 5+
unit residential properties, office buildings, warehouses and other commercial
property or mixed use.
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