Conforming Loans

What Is A Conforming Loan and How Can It Help?

A conforming loan is any mortgage that meets the loan limits set by Fannie Mae and Freddie Mac. These government-sponsored institutions provide a secondary market for home loans, so lenders can package conforming loans and sell them in investment bundles. They also make sure lenders follow certain rules for issuing conforming loans. This standardizes things like loan eligibility, pricing, and features. If you have good credit, conforming loans are great because they have lower interest rates attached to them.

Conforming Loans vs. Nonconforming

Conforming Loans

The national conforming loan limit set by the Federal Housing Finance Agency is $484,350 (2019). Fannie Mae and Freddie Mac cannot approve any loans under this limit. Benefits of conforming loans are that they often have lower interest rates, are easier to qualify for, and have looser credit score rules.

Conforming Loan Limits:

Number of Units Maximum original principal balance Alaska, Guam, Hawaii, and U.S. Virgin Islands only
1 $417,000 $625,500
2 $533,850 $800,775
3 $645,300 $967,950
4 $801,950 $1,202,925

NOTE: The conforming loan limit in Alaska, Hawaii, Guam and the Virgin Islands is 50% higher.

Nonconforming Loans

A nonconforming loan is any loan that exceeds the limits of a conforming loan; often referred to as “jumbo loans.” Nonconforming loans will have higher interest rates, will require a minimum down payment of 20% or more, and have stricter credit qualifications than conforming loans do.

Fees and Costs

If you can only provide a small down payment — any less than 20% of your conforming loan amount — you will have to pay for private mortgage insurance (PMI). This type of insurance is only to protect lenders, not homebuyers, in case you were to default on the loan. You will also need to pay a PMI premium, which is equal to 1% of your home loan’s value. These premiums will be broken up into monthly installments and be part of your mortgage payments.

Requirements for a Conforming Home Loan in Oklahoma

There are different requirements for a conforming loan based on whether you buy or refinance, and whether it is for a primary home, a secondary home, or an investment property. There are also different loan limits based on which county in Oklahoma you live in.

Keep these conforming loan qualifying factors in mind.

  • What is your loan-to-value ratio: How much you will borrow compared to the value of the home. The higher your loan-to-value ratio (ex: an 80% LTV) the lower your down payment needed.
  • What are your credit scores: You can get approved easier with higher scores, even with a smaller down payment.
  • How much are your current reserves: You may be required to have a specific amount in reserve.
  • What is your debt-to-income ratio: Your total amount of monthly debts (including mortgage payments) compared for your monthly income.
  • How many units (homes/apartments, etc.): Loan requirements are going to be different for single-family units, two family-units, etc.

We’re Here to Help

Main Number: (405) 722-5626

Here at Financial Concepts Mortgage, we believe in offering a variety of loan types to make sure you get what you need. If a conforming loan doesn’t seem right for you, we can help you find the loan options that are most beneficial for your situation. It can be difficult to understand the differences between the many home loan types; we are here to answer any question you may have.

Although we primarily serve homebuyers in Oklahoma, we are also able to provide loans to anyone in Texas and Arkansas.