A loan that doesn’t conform to guidelines established by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Sometimes also referred to as a jumbo loan.
A non-conforming loan is a loan that doesn’t conform to guidelines established by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. Sometimes also referred to as a jumbo loan.
Because these loans cannot be purchased by the GSEs, non-conforming loans can be more costly for lenders to originate and their interest rates are often (but not always) higher than those of smaller loans.
Because non-conforming mortgages do not have to conform to GSE guidelines, their underwriting standards and loan features vary more than those of conforming mortgages, and their prices do as well.
Because a small difference in interest rate can make a large difference in cost when loan amounts are higher, it is even more important for borrowers seeking non-conforming mortgages to comparison shop and negotiate their best mortgage rate.