What is the difference between a conforming and non-conforming loan?

Conforming loans have terms and conditions that adhere to guidelines established by Fannie Mae and Freddie Mac, the two, big quasi-government corporations that purchase mortgage loans from lenders then packages them into securities that are sold to investors.

Their guidelines are far-reaching and as such set borrower credit and income requirements, as well as the down payment, and maximum loan amounts.

Non-conforming loans are for buyers, such as the self-employed or people with poor credit histories, who do not qualify for mainstream loans.