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Understanding Loan Types

The subjects below explain the main loan categories that the many loan programs fall under. These are major types of loans, not to be confused with the individual loan programs themselves (such as Fixed Rate Loans or Adjustable Rate Mortgages).

Click on a loan type below:

Conventional Loans

Conventional loans are loans that are not insured or guaranteed by the government (see Government Loans). These loans are also broadly categorized into two groups, conforming loans and non-conforming loans. Conforming loans are loans which meet the requirements of two quasi-governmental agencies, Fannie Mae and Freddie Mac. Loans which do not conform to these guidelines are commonly called non-conforming loans.

Conforming Loans

As indicated above, conforming loans are sold to either Fannie Mae or Freddie Mac, and must therefore meet their lending requirements. These agencies provide a vital source of liquidity to the mortgage market by allowing lenders to originate loans and then sell them to one of these agencies. This allows the lender to then originate more loans, thus increasing the availability of money to make home loans. By government charter, neither Fannie Mae nor Freddie Mac directly originates loans. Conforming loans have down payment requirements from 3% to 20% or more, depending upon the individual details of the loan request. As an example, purchasing a home for an investment (i.e. to rent) will require a larger down payment than someone buying a home to occupy as their residence. There are many variables involved so prequalifying for a loan with a Comstock Loan Consultant is always recommended.

Non-Conforming Loans

These are loans which are generally not eligible for sale to either Fannie Mae or Freddie Mac. This is usually due to loan amounts above the requirements of these agencies. Many times these loans are also referred to as Jumbo Loans. Although sometimes other characteristics of the loan such as credit score or property type may also cause a loan to be classified as Non-Conforming.

Government Loans

FHA loans are insured by the government and generally offer borrowers the advantage of a lower down payment (3.5%), and are available for first time homebuyers as well as move up buyers. VA loans are guaranteed by the government and are available to qualified veterans offering up to 100% financing. FHA also offers a great program that can provide funds to fix or repair properties called the 203(k) program. This can be a great option for a borrower to purchase an owner occupied home and repair items that may not be functioning properly (heating and air conditioning), or not up to normal standards such as a kitchen which was damaged. There are specific requirements involved, so be sure to contact one of our professional loan consultants to obtain all of the latest information on these great programs.

In-House or Portfolio Loans

Sometimes lenders such as Banks or Credit Unions will have loan programs that may have guidelines that differ from those available from other lenders. Many times these individual lenders have established their own credit guidelines and requirements for lending because they will not sell the loan to anyone else. In this case, these loans are referred to as Portfolio Loans because the lender will retain the loan and all of the credit risk associated with that loan. Therefore, lending requirements could be more flexible or more stringent.

Commercial Loans

These are loans generally made on non-residential property such as office buildings, commercial buildings, restaurants or apartment buildings of more than 4 units. These loans may be offered by Banks or other lenders, and many times can also be offered with enhanced terms from the Small Business Administration (SBA). These loans will have different documentation and underwriting requirements than normally required on a residential loan.

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