CONFORMING HOME LOANS VS NON-CONFORMING HOME LOANS?

When you’re evaluating home loan categories, it’s easy to get confused by the terms “conventional” and “conforming and non-conforming.” As similar as these three terms may sound, their definitions are worlds apart, so it’s important to understand the distinctions. We’re here to clear the air. A CONFORMING HOME LOANS FOR 2025 is a mortgage that meets the loan limits and guidelines set by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that buy and guarantee mortgages. These loans must adhere to limits set by the Federal Housing Finance Agency (FHFA) and meet specific criteria regarding borrower creditworthiness, debt-to-income ratio, and loan-to-value ratio. As of 2025, the baseline conforming loan limit for single-family homes in most U.S. counties is $806,500, reflecting a 5.2% increase from the 2024 limit of $766,550. These limits are set annually by the Federal Housing Finance Agency (FHFA) to reflect changes in average home prices High-Cost Areas In regions where 115% of the local median home value exceeds the baseline limit, higher loan limits apply. For these high-cost areas, the ceiling loan limit for one-unit properties is $1,209,750, which is 150% of the baseline limit. This adjustment allows borrowers in expensive housing markets to access conforming loans without resorting to jumbo loans, which may have stricter requirements.​ Multi-Unit Properties Conforming loan limits also vary based on the number of units in a property:​ Two-unit properties: Baseline limit of $1,032,650; high-cost area limit up to $1,548,975.​ Three-unit properties: Baseline limit of $1,248,150; high-cost area limit up to $1,872,225.​ Four-unit properties: Baseline limit of $1,551,250; high-cost area limit up to $2,326,875 Specifics for Orlando, Florida Orlando is located in Orange County, Florida. For 2025, the conforming loan limit for a single- family home in Orange County is $806,500, aligning with the national baseline. This means borrowers in Orlando can finance homes up to this amount using conforming loans, potentially benefiting from more favorable terms compared to non-conforming (jumbo) loans.​ Benefits of Conforming Loans Conforming loans typically offer:​ Lower Interest Rates: Due to reduced risk for lenders.​ Standardized Guidelines: Simplifying the qualification process.​ Easier Approval: For borrowers meeting the established criteria.​ Understanding these limits and benefits can assist you in making informed decisions about financing your home purchase in 2025 ----- ​A NON-CONFORMING HOME LOANS FOR 2025, commonly known as a jumbo loan, is a type of home loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). For 2025, the baseline conforming loan limit for single-family homes is $806,500. Loans surpassing this amount are considered non-conforming and are not eligible for purchase by government-sponsored enterprises like Fannie Mae and Freddie Mac. ​ Key Characteristics of Non-Conforming (Jumbo) Loans: Loan Amounts: Non-conforming loans are typically used for financing properties that require loan amounts higher than the conforming loan limits. For example, in most areas, any mortgage exceeding $806,500 would be classified as a jumbo loan. ​ Credit Requirements: Lenders often require higher credit scores for jumbo loan applicants, typically a minimum of 700, due to the increased risk associated with larger loan amounts Down Payment: Borrowers may need to make larger down payments, often 20% or more, depending on the lender and specific loan terms Debt-to-Income (DTI) Ratio: Lenders usually prefer a lower DTI ratio for jumbo loan borrowers, often not exceeding 43%, to ensure borrowers can manage the larger monthly payments. ​ Interest Rates: Jumbo loans may carry higher interest rates compared to conforming loans, reflecting the increased risk to lenders. ​ Considerations for Borrowers: Qualification Criteria: Due to the larger loan amounts and associated risks, lenders impose stricter qualification criteria on jumbo loan applicants. ​ Financial Preparedness: Prospective borrowers should ensure they have a strong credit profile, sufficient income, and substantial savings to meet the down payment and reserve requirements. ​ Loan Shopping: Interest rates and terms for jumbo loans can vary significantly between lenders. It's advisable to shop around and compare offers to secure the most favorable terms. Understanding the specifics of non-conforming mortgages is crucial for borrowers considering financing options beyond the standard conforming loan limits. Given the higher stakes involved, thorough preparation and consultation with our experience loan officer professionals who can assist you in navigating the complexities of jumbo loans effectively.