Conforming & Conventional Mortgages – What’s The Difference?

The difference is that there is no difference!

The term “conforming” is most often used when speaking specifically about a mortgage amount; however, the terms “conforming” and “conventional” are frequently used interchangeably. These are mortgages that meet the underwriting criteria and loan size that make them eligible for purchase by Fannie-Mae & Freddie-Mac. The conforming loan limit is currently $417,000. Loans above this amount are referred to non-conforming or jumbo loans.

Conforming or Conventional Mortgages allow you to put as little as five percent down when purchasing a home. The credit scores that are required are lower than they are for jumbo or super-jumbo loans. The current minimum FICO score needed for a conforming mortgage is 620. The reserve requirements for liquid assets after closing are also less than they are for non-conforming or jumbo loans.

Conventional or Conforming Mortgages that meet Fannie-Mae & Freddie Mac eligibility requirements are available for fixed-rate and adjustable-rate mortgages. Fixed-rate mortgages can have the term set at 30, 25, 20, 15, or 10 years. The shorter the amortization period the monthly payment will be higher. Adjustable-rate mortgages are all based on a 30 year amortization and can have the initial rate, or start rate of the loan set for the first 3, 5, 7, or 10 years before that rate begins to adjust.

Because of the secondary market that Fannie-Mae & Freddie-Mac provide for conforming or conventional mortgages their rates are typically less than the rates for jumbo or super-jumbo mortgages. In addition, the underwriting guidelines are not as stringent for these types of mortgages.

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