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.
More
resources