What defines a loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac?

What defines a loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac?

• A. Prime loan
• B. Non-conforming loan
• C. Subprime loan
• D. Wrap-around mortgage

Answer: (B)

A loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac is classified as a non-conforming loan. Conforming loans adhere to specific standards set by these government-sponsored enterprises, including limits on the loan amount. When a loan surpasses these limits, it cannot be sold to Fannie Mae or Freddie Mac and thus falls into the non-conforming category. Non-conforming loans are often considered to be riskier due to their size and the fact that they do not meet the standards set for conforming loans. This can result in higher interest rates and stricter underwriting criteria by lenders. Factors contributing to a loan being categorized as non-conforming include not just exceeding the loan limit but also if it does not meet other loan criteria established by the conforming loan standards. It's crucial for borrowers and loan officers to understand this classification as it affects the availability of loan options and the terms attached to those loans.

A loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac is classified as a non-conforming loan. Conforming loans adhere to specific standards set by these government-sponsored enterprises, including limits on the loan amount. When a loan surpasses these limits, it cannot be sold to Fannie Mae or Freddie Mac and thus falls into the non-conforming category.

Non-conforming loans are often considered to be riskier due to their size and the fact that they do not meet the standards set for conforming loans. This can result in higher interest rates and stricter underwriting criteria by lenders.

Factors contributing to a loan being categorized as non-conforming include not just exceeding the loan limit but also if it does not meet other loan criteria established by the conforming loan standards. It's crucial for borrowers and loan officers to understand this classification as it affects the availability of loan options and the terms attached to those loans.