If you are planning on buying a home sometime soon, you might be exploring your options for taking out a loan. There are a few different types of mortgages out there that you can apply and qualify for, including conforming and non-conforming mortgages. If you are curious about whether or not you should try to apply for a conforming loan, consider the points below. If they all apply to you, then looking for a conforming mortgage is probably going to be your best bet.
You Aren't Looking for a Really High-Value Home
One of the main differences between conforming mortgages and non-conforming mortgages is that conforming mortgages cannot be for loan amounts higher than a set amount. This amount changes from year to year. Typically, though — depending on the average cost of homes in your area since markets can vary significantly from one city to another — you will not be able to buy a large, luxurious home while staying within these limits. However, typically, limits do cover the cost of a home that would be more than suitable for the average family. If you aren't sure, you should consider looking up the maximum conforming loan limits for the year and then take a look at the price tags on some of the homes that you might be interested in.
You're Looking for More Favorable Loan Terms
One of the main reasons why many borrowers attempt to get a conforming loan is because these loans often have much more favorable terms for the borrower. Primarily, borrowers who qualify for conforming loans are often able to get a lower interest rate. Interest rates matter when you are buying pretty much anything, but when you are purchasing a home that costs hundreds of thousands of dollars and that you will be paying off for 15, 20, or 30 years, then even a minor difference in interest rate can have a huge impact.
You Meet Specific Criteria
There are a lot of good things about qualifying for a conforming mortgage instead of a non-conforming mortgage, but there are some downsides as well. Although there are loan programs out there that are available for those who don't have the best credit scores or who don't have a high down payment, you probably will not be able to qualify for a conforming loan if you have a really low credit score. If you are a fairly well-qualified buyer, however, a conforming loan might just be a good option for you.
Reach out to a professional for more information about conforming loan programs.Share
22 January 2021
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