Conforming Loan Limits Versus NON-QM Loans On Home Purchase

This BLOG On Conforming Loan Limits Versus NON-QM Loans On Home Purchase Was UPDATED On January 3rd, 2025.

Understanding your financing options is important to making an informed decision when purchasing a home. The popular mortgage loan types are conforming and non-QM (non-qualified mortgage) loans. Each provides distinct borrower needs and comes with unique benefits and limitations. Here’s a closer look at how these loans differ and which might be the better choice for your home purchase. In this article, we will discuss and cover conforming loan limits versus non-QM loans.

What Are Conforming Loans?

Conforming loans adhere to the lending guidelines established by Fannie Mae and Freddie Mac, including strict standards for loan limits, creditworthiness, and debt-to-income (DTI) ratios. These loans are mostly considered the gold standard in mortgage lending.

Key Features of Conforming Loans:

1. Loan Limits: As of 2024, the conforming loan limit for single-family homes is $750,000 in standard areas and up to $1,089,300 in high-cost regions.
2. Borrower Requirements: Strict criteria, including good credit scores (typically 620 or higher) and low DTI ratios.
3. Lower Interest Rates: Conforming loans offer competitive interest rates due to their lower risk.
4. Securitization: These loans are bundled and sold to investors, creating liquidity in the mortgage market.

What Are Non-QM Loans?

Non-QM loans, or non-qualified mortgages, are designed for borrowers who do not reach traditional lending criteria. They offer flexibility for individuals with unique financial situations, such as self-employed borrowers, investors, or those with credit challenges.

Key Features of Non-QM Loans:

1. No Conforming Loan Limits: Non-QM loans can exceed conforming loan limits, making them suitable for high-value properties.
2. Alternative Documentation: Allows income verification through bank statements, profit and loss statements, or other non-traditional methods.
3. Flexible Credit Requirements: Accepts lower credit scores, often starting around 500-620.
4. Higher Interest Rates: Non-QM loans typically carry higher interest rates due to increased risk.

Conforming Loan Limits Versus NON-QM Loans And Loan Programs

Any mortgage loans higher than $453,100 are called non-conforming loans and fall in the Jumbo Mortgage territory. Conforming Loan Limits Versus NON-QM Loans is like day and night. NON-QM Loans can be done with home loans up to $3,000,000.

• Gustan Cho Associates has launched multiple non-QM loan programs
• There is no waiting period after housing events and/or foreclosure with non-QM loans
• There is no loan limits with non-QM loans
• There is no private mortgage insurance requirement on all of our non-QM loan programs at Gustan Cho Associates
• Down payment requirements range from 5% down payment to 20% down payment
• The amount of down payment is dependent on borrowers credit scores
• Mortgage rates on non-QM loans are dependent on borrowers down payment and credit scores
• Gustan Cho Associates has bank statement loans for self-employed borrowers
• There are 12 months and/or 24 months bank statement loan programs for self-employed borrowers
• No income tax returns are required
• Either personal or business bank statements can be used
• Gustan Cho Associates offers 5% down payment Jumbo Mortgages With No Mortgage Insurance

We also offer NON-QM Jumbo Mortgages for borrowers with credit scores down to 500.

What Triggered Conforming Loan Limits Versus NON-QM Loans?

Real Estate and Mortgage Industry Experts credit the conforming loan limits increases for two years in a row being triggered due to rising home prices.

• FHFA increasing loan limits was a very rare thing
• It was the first time of conforming loan limits increase since 2006 by the Federal Housing Finance Agency
• To add to the surprise, FHFA then increased conforming loan limits for 2018
• This is the second increase for two years in a row
• The Federal Housing Finance Agency, and the United States Department of Housing and Urban Development, which is HUD and the parent of the Federal Housing Administration, both increased loan limits for 2017 and again 2018

Conforming Loans are Fannie Mae and Freddie Mac Conventional Loans. Government loans are home loans that conform to the following government agency guidelines:

• FHA Loans under the direction of HUD Guidelines
• VA Loans under the direction of the United States Department of Veteran Affairs or VA
• USDA Loans under the direction of the United States Department of Agriculture Rural Development

Conforming Loans Versus Jumbo Mortgages

Conforming Loans have many more benefits than Jumbo Mortgages. Government and Conforming Loans are much easier to qualify Versus Jumbo Mortgages. Here are the benefits of conforming loans versus traditional jumbo mortgages:

• Conforming Loans:
  • Conventional Loans, require down payment on a home purchase of 3% down payment for first time home buyers
  • Or 5% down payment for seasoned home buyers
  • First time home buyers are defined for homebuyers who did not have any ownership of a home in the past 3 years
• Jumbo Mortgages traditionally require 20% down payment:
• Gustan Cho Associates now offers Jumbo Mortgage Loan Programs with 5% down payment on Jumbo Mortgages
• Minimum Credit Score Requirements by Fannie Mae and Freddie Mac is 620 FICO Credit Scores Versus 700 Credit Scores on Traditional Jumbo Mortgages
• Gustan Cho Associates offers NON-QM Jumbo Mortgages with 5% down payment
• We also offer Jumbo Loans with credit scores down to 500
• The lower the credit score, the higher the down payment is required

What Happens If Conforming Loan Limits Does Not Increase But Home Prices Do?

The Federal Housing Finance Agency, or FHFA, is the federal agency that is responsible for setting Conventional Loan Limits for conventional mortgage loans that are purchased by both Fannie Mae and Freddie Mac.

• VA loan limits normally follow conforming guidelines
• Conforming Loan Limits Increase In 2017 and 2018 includes for both Conventional Loans and VA Loans
• Both Conventional Loans and VA Loan Limits have increased from $417,000 to $424,100 for a single-family home and/or one-unit home and increased to $453,100 for 2018
• There are high-cost areas in the United States where high cost conforming loan limits apply
• The maximum Conforming Loan Limits Increased In 2018
• It was at 636,150 but now is at $679,500 on single-family homes

If you are a home buyer that needs higher loan amounts than the Conforming Loan Limits Increase In 2018 above, Gustan Cho Associates offers non-QM loans. There are no loan limits on non-qm loans. There is no private mortgage insurance required. Credit Scores down to 500 FICO.

FHA Loan Limits Increase

FHA increased the FHA Loan Limits to $498,257 in 2024 and $524,225 in 2025 for one-unit properties. This is for most of the areas in the United States and excludes high-cost areas.

Here Are The FHA Loan Limit Increases In 2025

• One Unit Property FHA Loan Limits $524,225
• Two Unit Properties FHA Loan Limits $671,200
• Three Unit Properties FHA Loan Limits $811,275
• Four Unit Properties FHA Loan Limits $1,008,300

Frequently Asked Questions (FAQs)

1. What is a conforming loan?

A conforming loan meets the standards set by Fannie Mae and Freddie Mac, including loan size and borrower qualifications.

2. What are conforming loan limits?

Conforming loan limits are the highest loan amounts permitted by Fannie Mae and Freddie Mac, which vary by region. In 2024, the base limit is $750,000, with higher limits in high-cost areas.

3. What are Non-QM loan?

Non-QM (non-qualified mortgage) loans don’t meet regular lending guidelines. Still, it provides flexible options for borrowers with unique financial situations.

4. How do non-QM loans differ from conforming loans?

Non-QM loans cater to borrowers with alternative documentation, higher DTI ratios, or credit challenges, while conforming loans require stricter income, credit, and debt-to-income verification.

5. Can Non-QM loans be used for home purchases above conforming loan limits?

Yes, non-QM loans, including jumbo loans, are often used for properties that exceed conforming limits.

6. What are the credit requirements for non-QM loans?

Non-QM loans typically accept lower credit scores than conforming loans, with minimum scores around 500-620.

7. Do non-QM loans have higher interest rates?

Yes, non-QM loans usually have higher rates due to increased risk, but they offer greater flexibility in underwriting.

8. Are non-QM loans harder to qualify for?

Not necessarily. While they don’t follow traditional guidelines, they are designed to accommodate borrowers with unique financial profiles.

9. Who should consider a Non-QM loan?

Borrowers with inconsistent income (e.g., self-employed), credit challenges, or those purchasing luxury homes above conforming loan limits.

10. Can conforming loans and non-QM loans be refinanced?

Both loan types can be refinanced, but the process and requirements differ based on the lender and loan program.