The difference between Conventional and Conforming Loans.
Ever since I can remember, these two terms are incorrectly referenced in the media, websites, and by Mortgage lenders and Realtors as well. So what is the difference between a Conventional Loan and a Conforming loan? Let's start with defining Conventional Loans. Loans fall into two main categories: Government and Conventional. Government loans include FHA Loans (Federal Housing Administration), VA Loans (department of Veterans Affairs) and USDA Rural Development (United States Department of Agriculture). If a loan is not one of the former three, VA, FHA, or USDA, then it is a Conventional Loan. Conventional loans are offered by big banks, credit unions, FNMA (Fannie Mae), FHLMC (Freddie Mac), Mortgage Banks, Direct Lenders, etc. A loan is first defined as either Government or Conventional.
So now let's talk about Conforming Loans. Conforming loans are loans that meet the Underwriting guidelines and requirements of FNMA (Fannie Mae) and FHLMC (Freddie Mac). Simple as that. If the Fannie/Freddie Shoe fits, it's a conforming loan. The next qualifier for conforming is the Conforming loan limit. This is $647,200 nationwide. However, in 2008, Congress approved higher loan limits for some high cost areas. These loan limits go up to $970,800 for a single family residence, and can change annually. Loans made under the higher loan limits are called Conforming Jumbo, Super Conforming, and Conforming High Balance Loans. Here are the California Conforming High Balance Loan limits for 2022.
A non-conforming loan is one that does not fit the Fannie Mae or Freddie Mac guidelines. This can include Jumbo Loans, Portfolio Loans, Non-QM Loans, Alt-A and subprime loans. While Alt-A and Subprime loans are no longer available, we do offer Jumbo Loans, Portfolio Loans, DSCR, Bank Statement, and Non-QM loans to our clients. These offer higher loan limits than the Conforming limits.
VanDyk Mortgage is your source for all of the above loans. FHA, VA, USDA, Conforming, High Balance, and Jumbo.