The primary difference is the loan amount. Conforming loans adhere to FHFA limits and can be purchased by Fannie Mae and Freddie Mac, which provides a layer of security for lenders. Jumbo loans exceed these limits and are not eligible for purchase by these government-sponsored enterprises, so lenders carry more risk, leading to stricter borrower qualifications.
Locking your rate protects you from market volatility. Interest rates can change daily, or even multiple times a day, based on economic factors. By locking your rate, you secure your interest cost and monthly payment, ensuring your home buying budget remains stable even if market rates rise before you close.
The single biggest risk is the potential for foreclosure. Since your home is the collateral for the loan, if you fail to make the required payments, the lender can initiate foreclosure proceedings. This could result in you losing your home.
The down payment amount is crucial because it directly impacts your loan size, monthly mortgage payment, interest rate, and whether you’ll have to pay for Private Mortgage Insurance (PMI). A larger down payment generally means lower monthly costs and less paid in interest over the life of the loan.
These terms are often used interchangeably in the mortgage context. Technically, “forbearance” is the general agreement to pause payments, while “deferment” often refers to the specific solution where the missed payments are moved to the end of the loan. In this case, you resume your normal payments, and the forborne amount becomes a non-interest-bearing balloon payment due when you sell the home, refinance, or pay off the loan.
