As a home buyer, you may have heard about different types of mortgages available to you — but what are the main distinctions between them all? For example, what is a jumbo loan vs. a conforming loan? In this post, we’ll go over these two common mortgage options while also discussing whether or not a jumbo loan is right for you. If you are interested in buying a home in the Los Angeles area, contact CalSun Mortgage today.
What Is A Conforming Loan?
A conforming loan is a mortgage that adheres to the guidelines set by Fannie Mae and Freddie Mac. These two organizations purchase mortgages from lenders, so in order for a loan to be considered “conforming”, it must meet their standards. There are several requirements that a mortgage must meet in order to be classified as conforming. First, the loan amount cannot exceed $424,100 — this is known as the “Conventional Mortgage Limit”. Second, the borrower must have a credit score of at least 620. And finally, the property being purchased must fall within certain geographical boundaries — these vary depending on which part of the country you are in.
What Is A Jumbo Loan?
A "jumbo" loan is any non-conventional type of financing which exceeds Fannie Mae or Freddie Mac guidelines on size — meaning that they're larger than those set by traditional lending institutions like banks . These days, a jumbo loan ranges anywhere from the mid-500s to the low-800s, depending on the average cost of homes in the area in which you live.
What Are The Biggest Differences Between Them?
Jumbo loans aren’t as common as conforming loans, which means that they often come with stricter requirements in terms of credit score and down payment. Additionally, interest rates on jumbos are typically higher than those on conforming mortgages. Another difference between these two types of mortgages has to do with how they’re insured. Jumbo loans are not backed by the government-sponsored enterprises like Fannie Mae or Freddie Mac, so they require private mortgage insurance (PMI).
Do I Need A Jumbo Loan?
Whether or not you need a jumbo loan depends on the kind of house you want to buy. In certain areas, Los Angeles is a perfect example, conforming loans can be for more money because of the cost of property.
Contact CalSun Mortgage today to learn more about your mortgage options.