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Vernacular: Conventional, Conforming, High Balance, Low Balance, Etc.

Here is a brief vernacular review, as some of our clients have been confused lately. Fannie, Freddie, Conforming and Conventional loans are all the same thing. A loan is considered “conforming” if it “conforms” to Fannie and Freddie guidelines.

Lenders split “conforming” limits into “Low Balance” and “High Balance” categories. Low Balance loans cap out at $417,000 and tend to have slightly lower (about 1/4 percent) rates. High Balance loans run from $417,000+ to $625,500 (depending on the county).

But the important thing to note is that ALL Fannie/Freddie loans from $1,000 to $625,500 are considered “conforming.” Borrowers often mistakenly think only loans under $417,000 are conforming.

Non-conforming loans include (1) FHA; (2) VA; (3) Jumbo; (4) Portfolio; and (5) Private or Hard Money. FHA and VA loans are often referred to as “Government Loans” (even though Fannie and Freddie’s loans are now also effectively “Government Loans”). Jumbo loans are funded and bought by large investors, independent of the government. Portfolio loans are funded and then usually held by banks.

Private or hard money loans are usually short-term in nature, with high rates, high fees, and low LTVs. They are typically based on equity only, with little focus on credit and income.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646