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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. What is a conforming loan
Conforming loan definition
A conforming loan is a mortgage eligible to be purchased by Fannie Mae and Freddie Mac, the government-sponsored enterprises, or GSEs, because it meets — or conforms — to their standards, including limits on the amount that can be borrowed. The for a single-family home is $647,200 in most housing markets. In higher-cost areas, the limit is $970,800. What are conforming loan standards
Loan limit Credit score Debt ratios Down payment/equity Can I still qualify with a lower down payment
What is the minimum credit score needed to qualify for a conforming mortgage
Because a bigger down payment reduces their risk, lenders are willing to accept a borrower with a credit score as low as 620 for a conforming loan — but with two important caveats: Individual lenders can and do have their own, often higher credit standards, in addition to Fannie Mae and Freddie Mac requirements. A 620 credit score generally will not be enough to get the . When offering the best rate possible, lenders look for borrowers with higher credit scores who represent less risk. If your credit score is 780 or higher, you’ll be much more likely to get the best available rate. How will my debt ratios be evaluated
Front-end ratio: Back-end ratio: How flexible is the conforming loan limit
Pros and cons of conforming loans
Pros
If you make at least a 20 percent down payment, that means there’s less money for you to borrow and also more home equity at the time you purchase your home. In turn, your monthly payments are lower compared to a loan with less money down. If you do put at least 20 percent down, you won’t need to pay for PMI, which represents significant monthly savings. Depending on your loan amount, PMI can cost a few hundred dollars per month. If you can put 20 percent down, and have good credit and strong financial reserves, you’re likely to qualify for the lender’s best rate and the lowest monthly payments overall. Cons
Your DTI ratio must meet conforming loan standards. The maximum DTI ratio is typically 36 percent, but that can stretch to 45 percent or even 50 percent if you have other “compensating factors,” such as a higher credit score. The home you want to buy could exceed conforming loan limits, especially if you’re in a higher-priced market. Alternatives to conforming loans
Conforming vs non-conforming loans
A conforming loan conforms to, or meets, Fannie Mae and Freddie Mac standards pertaining to the borrower’s credit, down payment and other factors like loan size. A on the other hand, does not conform to, or meet, these standards. For example, a is a non-conforming loan because the amount borrowed exceeds the Fannie Mae and Freddie Mac limit. The fact that a loan is non-conforming doesn’t mean it’s bad, however; it simply means that it doesn’t meet the criteria to be purchased by the enterprises. Conforming vs conventional loans
A conforming loan must meet specific criteria set by the FHFA, including conforming loan limits. A is any loan that isn’t guaranteed or insured by the government (FHA, VA and USDA loans). Conventional loans can be either conforming or non-conforming. What are conforming loan rates
How to get the best conforming loan for you
1 Check your credit report
2 Get your documents in order
3 Compare loan rates
Take the time to from at least three different lenders. Consider your needs and preferences when creating a short list of lenders to work with — you might want to start with your bank (if it offers mortgages), or consider a credit union or online lender, for example. Beyond the general terms of the loan, look closely at each lender’s fees and points. 4 Get preapproved
5 Avoid excessive spending
Learn more
SHARE: Peter G. Miller is a contributing writer at Bankrate. Peter writes about mortgage rates and home buying. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles