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Loan Categories
The major loan categories are conventional and
government. Conventional loans can be further categorized into
conforming and non-conforming. Government loans primarily refer
to FHA and VA loans.
Conforming Loans
A conforming loan adheres to the guidelines established by
Fannie Mae or Freddie Mac. These guidelines establish maximum
loan amounts, down payment, credit and income requirements and
acceptable property types. Lenders that make loans according to
these guidelines may sell them to Fannie Mae or Freddie Mac.
Conforming loans make up the majority of loans in the U.S.
Non-conforming Loans
Loans that do not conform to the guidelines established by
Fannie Mae or Freddie Mac are called non-conforming loans. A
loan that is larger than the conforming loan limit is called a
Jumbo loan. Loans that do not meet the credit quality of
conforming loans ('A' paper) are referred to ad A- through 'D'
paper loans, or subprime loans.
Government Loans
FHA and VA loans are the two most popular types of Government
loans. Government loans have different loan limits and
qualifying criteria compared to conventional loans.
Portfolio Loans
Loans may be sold on the secondary market to Fannie Mae, Freddie
Mac or a select number of conduits (e.g. GE Capital) or they may
be kept in the bank's portfolio. Portfolio loans generally have
more flexible qualifying criteria, while saleable loans must
meet more strict criteria.
Commercial Loans
Loan programs discussed above apply to one- through four-family,
residential properties. Loans on residential properties
containing five or more units, office buildings, warehouses and
other commercial properties are considered commercial loans. |
