What is a nonconforming loan?
Nonconforming loans do not meet the mortgage (LIMITS instead of ->) guidelines set by Fannie Mae and Freddie Mac. As such, they’re considered higher risk and tend to have higher interest rates than conforming loans. The most popular type of nonconforming loan is the jumbo loan, which is for a property that is more expensive than the mortgage limits set by Fannie Mae and Freddie Mac. Jumbo loans usually come with fairly stringent credit score, down payment, and debt-to-income ratio (DTI) requirements. Other types of nonconforming loans include government-backed loans, such as FHA loans, USDA loans, and VA loans. These kinds of mortgages are designed to provide affordable housing options for those who may not qualify for a conforming loan. Learn more about what nonconforming loans are and how they differ from conforming loans.
Related terms: Conforming loan, jumbo loan, Federal Housing Administration loans, VA loans