Is a conventional loan the same thing as a conforming loan?
Yes and no. Conventional loans and conforming loans are considered by many to be the same type of loan because there is overlap between them. You see, all conforming loans are conventional loans, but not all conventional loans are conforming loans.
Conventional loans are defined by the type of lender who offers them. Banks, credit unions, and mortgage companies offer conventional loans.
Conforming loans are defined by their lending criteria. Fannie Mae and Freddie Mac purchase conforming loans from lenders to stabilize the mortgage market and make more cash available for lenders to offer loans to Americans. Because of this, Fannie and Freddie set lending criteria and conforming loan limits. These limits help prevent homeowners from borrowing more than they’ll comfortably be able to pay back.
However, some homes around the US have purchase prices that exceed the conforming loan limits. Banks, credit unions, and private lenders may also offer non-conforming loans to enable qualified homebuyers to purchase these more expensive homes. These conventional non-conforming loans are known as jumbo loans.
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