Conforming loans have terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These two agencies provide a continuous flow of affordable funds for home financing to Mortgage Bankers like Compass Mortgage.
Non-conforming loans include:
- Jumbo loans, which are above the maximum loan amount established by Fannie Mae and Freddie Mac. Because they are bought and sold on a much smaller scale, they usually have a higher interest rate than conforming loans.
- B/C Loans: Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called “B”, “C” and “D” loans (vs. “A” conforming loans). B/C loans are offered to prospective homeowners who may have recently filed for bankruptcy or foreclosure, or who have had late payments on their credit reports. These borrowers may have to pay higher fees and/or a higher interest rate on non-conforming loans, because they represent a higher risk. B/C loans are expected to be a form of temporary financing until the borrowers can qualify for and refinance to a lower rate conforming "A" program.
Next time, we'll look at government loans.
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