A conforming loan is one that conforms to the underwriting guidelines of Fannie Mae or Freddie Mac, the two government- controlled real estate investment corporations. Their guidelines can get complicated, but generally all you need to know is that mortgages need to be less than a certain amount of money in order to conform to the guidelines. The amount of money that determines conformity changes from time-to-time, most recently in 2022. A jumbo loan, as you might have guessed, is one that is larger than the conforming price set by Fannie Mae or Freddie Mac. These loans are for enough money that they present a considerable risk to the lender, and therefore are harder for borrowers to obtain. In case this isn’t clear, let’s assume that this year the Fannie Mae and Freddie Mac conforming limits are both the same at $500,000. A conforming loan will be anything below $500,000 and a jumbo loan will be anything above $500,000. However, due to the cost-of-living being different across the country, certain areas have higher conforming loan limits than others. Therefore conforming and jumbo loans will be different depending on your area. Most real estate agents will only deal with home prices that fall below the conforming price, so this will rarely come up with you. However, the difference between obtaining a conforming loan and obtaining a jumbo loan is significant, so it’s important to understand the terms when dealing with lenders. Now you know about the mortgage options on the table. Let’s talk a bit about the people involved in making the mortgage a reality.
THE PLAYERS INVOLVED IN THE LENDING PROCESS
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