Conforming and Nonconforming home loan programs

Conforming loans or conventional as these programs are sometimes called are the mortgage loans with the best rates, but with the strictest underwriting guidelines.  You must have excellent credit, verifiable income and assets, and money in reserves that is again verifiable.  They are called conforming because the underwriting guidelines are the same from one lender to the next.  These guidelines were established so that mortgages could be sold on the secondary market.  They would be difficult to sell from one lender to another if each financial institution had their own guidelines.  On the other hand, non-conforming loans or sub-prime loans as they are sometimes referred to are programs that offer more flexibility to clients who have past credit problems, high debt ratios, limited resources, or unverifiable income or assets.  The underwriting guidelines for these types of programs are proprietary and vary from one lender to another.  This flexibility does come at a price.  Rates and closing costs on these types of loans are often higher than conforming loans due to the increased risk the lender is taking.  Conforming and Non-conforming loans are available for the purchase or refinance of primary residences, second homes, and investment properties.