________ loans are loans that 'conform' to FNMA, FHLMC standards.

________ loans are loans that 'conform' to FNMA, FHLMC standards.

• A. Conforming
• B. Jumbo
• C. Subprime
• D. Adjustable-rate

Answer: (A)

Conforming loans are loans that meet the underwriting guidelines set by Fannie Mae and Freddie Mac. Because they conform to these standards, lenders can sell or securitize them to the GSEs, which provides greater liquidity and typically lowers borrowing costs. Key aspects often associated with conforming loans include staying within the agency's loan-size limits for a given area, along with requirements for credit score, debt-to-income ratio, occupancy, property type, and documentation. Jumbo loans exceed the conforming loan limits and usually have stricter qualification standards and higher rates. Subprime describes borrowers with lower credit quality rather than a specific loan type. Adjustable-rate describes how the interest rate changes over time and, while it can be conforming if it meets the guidelines, the rate structure itself doesn’t define conformity.

Conforming loans are loans that meet the underwriting guidelines set by Fannie Mae and Freddie Mac. Because they conform to these standards, lenders can sell or securitize them to the GSEs, which provides greater liquidity and typically lowers borrowing costs. Key aspects often associated with conforming loans include staying within the agency's loan-size limits for a given area, along with requirements for credit score, debt-to-income ratio, occupancy, property type, and documentation.

Jumbo loans exceed the conforming loan limits and usually have stricter qualification standards and higher rates. Subprime describes borrowers with lower credit quality rather than a specific loan type. Adjustable-rate describes how the interest rate changes over time and, while it can be conforming if it meets the guidelines, the rate structure itself doesn’t define conformity.