The big difference is the borrowing limit, although other factors come into play. Most everyone who gets a mortgage has a conforming loan.
Conforming loans
Limits: Conforming loans are generally limited to $417,000, although there are higher limits in areas where housing is very expensive. The conforming loan'limit can go up to $625,000 in housing markets, such as certain counties'in California, New York, Massachusetts, and Washington, D.C., among others.
Loan-to-value ratio: Your down payment has to be equal to 20 percent or more of the home's value, but first-time buyers can qualify for a conforming loan through Fannie Mae with as little as 3 percent down. Your mortgage lender helps with the required forms and analysis of what you qualify to buy.
Credit score: A conforming loan requires a FICO credit score of 620 or better. However, there are other government-insured mortgages (such as FHA loans) for lower credit scores.
Debt-to-income ratio: Your debt-to-income ratio can be no more than 36 percent (although some exceptions raise this to 45 percent) of your gross income.
Non-conforming loans
Sometimes people can't qualify for a conforming loan. They might need a non-conforming Jumbo loan to buy a property that costs more than the loan limit . Or they might have problem credit, such as a low credit score from bankruptcies. Self-employed people might not be able to document their income.
In the case of credit or income documentation, some lenders might still make a loan, but the interest rates and down payments will be higher.
Such loans often require payment of large fees up front, and there could be expensive insurance requirements.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.