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Do you need a mortgage but you're a bit confused about some of the terminology being used by your mortgage lender? Mortgages are essentially organized in one of three categories, which are known as conforming, high-balance, and jumbo loans. Here is what you need to know about conforming loans so that you can be well informed. 

What Qualifies As A Conforming Loan?

One of the main things that qualifies as a loan is a conforming loan is the amount of the loan itself. In most areas, it will be a limit of $510,400 for a single-unit property. Make sure you do not confuse this with the price of the property that you are buying since this is only based on the loan amount that you are requesting. You can offset the size of the loan by providing a bigger down payment, which will give you a smaller loan to help qualify as a conforming loan. Keep in mind that this limit may be lower or higher if you live in an area where the median price of homes is higher, so make sure to check with your lender to know the local conforming loan limits. 

Why Would You Want To Qualify For A Conforming Loan?

If your property is on the cusp of qualifying for a conforming loan, it may be in your best interest to provide a bigger down payment and lower the loan amount that you need for a few reasons. First of all, you'll find that a conforming loan will have a lower interest rate when compared to a high balance or jumbo loan, which means providing the extra cash can lead to major savings over the years. A conforming loan will not have credit check requirements that are as strict as they would be for a high balance or jumbo loan. This can make it easier to qualify for the mortgage that you are seeking.

Why Is It Harder To Get A Non-Conforming Loan?

Some home buyers realize that it is hard to get a loan for a more expensive mortgage when it does not fall into the conforming loan category. That is because more risk is put onto the mortgage lender since the government will not buy those non-conforming loans from the lender. Freddie Mac and Fannie Mae will only buy conforming loans, and some lenders will only offer conforming loans because of this. 

Reach out to your mortgage lender if you have more questions about conforming loan programs.