Who Qualifies for Conforming Loans?

Those who qualify for conforming loans have to be what is called "natural persons." This means that an actual person must be the one applying for a loan, not a corporation or other type of entity. This can create problems for property that is in the possession of a trust, because it is not officially owned by a person. Commercial applicants are usually not able to use conforming loans. Those who are applying for a conforming loan must be at least eighteen in most states, and also must be a legal US resident. Aliens can apply under Freddie Mac if they have a visa that is current.

Considerations Before Applying for Conforming Mortgages

If you would like to save money on your next home mortgage, than conforming mortgages might be a good option for you, but you need to make sure that you conform to the conforming loans guidelines. Check out your credit rating before applying, and if there are problems, work on fixing them. Also, make sure you have 20% to put down as a down payment.

Next, consider the cost of the property you are looking to buy. Does it fall within the current upper limits? Most first time homebuyers do not have this problem, but if you are moving up, your loan may be too expensive.

Keep in mind that if you had a loan earlier that was not at a good interest rate due to credit history problems, you can refinance under the conforming loan programs after fixing your credit history. This can save you thousands of dollars over the life of your mortgage.

Non-Conforming Home Loans Vs. Conforming Loans

The biggest difference between conforming and nonconforming mortgages is the limits of the conforming loans. If you need to borrow more than the conforming loan allows, you will either need to save more for your down payment, or you will need to go with a non-conforming loan.

Non-conforming loans typically have a higher interest rate than conforming loans. Non-conforming loans are still sold in the secondary markets, but not through Fannie Mae or Freddie Mac, so the sale is not guaranteed. This is why the interest rate is higher, usually much higher. On the flip side, non-conforming loans are often willing to accept borrowers with no income verification and less-than perfect credit, so if this is the situation you are in, you might need a non-conforming loan.

Benefits of Conforming Loans

If you qualify for conforming mortgage loans, then this is the way for you to go when financing your home purchase. You will receive the best interest rate available, and your loan will be backed by the names of Fannie Mae and Freddie Mac. For those who qualify, conforming loans carry the benefit of being considerably more affordable than other home loan options.