During your search for possible mortgage offers, you most likely encountered the term “conforming fixed loan.” Many people often use this term and “conventional loan” interchangeably, which should not actually be the case. A conforming loan can be a conventional loan, and vice versa, but they have different characteristics that distinguish them from each other.
Knowing the benefits of a conforming loan is key to determining whether it’s the wisest choice for you or if you’d be better off with another program, such as an FHA loan.
Conforming loans may just be what you need to finance that home purchase.
According to Direct Mortgage Loans, conforming fixed loans usually come with lower interest rates. This means lower payments every month and less expenses to worry about for the duration of your mortgage.
Additionally, these loans typically don’t have pre-payment penalties, which you can take advantage of to pay off your debt sooner. This brings with it the opportunities of a better refinancing program.
These loans have quicker turnaround times, since most lending institutions use automated underwriting system (AUS) when processing them.
There are qualifications to meet.
For a mortgage loan to be under the “conforming” type, it has to satisfy a set of criteria allowing Fannie Mae and Freddie Mac to buy it, with the loan limit being the primary and the most important. This limit pertains to the loan’s maximum amount, which can vary every year.
Most states follow the $417,000 cap for conforming loans. Homeowners can use this to finance the purchase of single-unit properties by single families. Once a loan goes beyond this specified limit, it may already be categorized as a “jumbo mortgage.”
All in all, a conforming fixed loan is one of your premier choices for a more affordable mortgage. Explore this option further to enjoy lower interest rates and the ability to get out of your debt sooner.