Conventional Loans
What are Conventional loans?
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional mortgage meets the guidelines set by Fannie Mae and Freddie Mac. It can have either a fixed or adjustable rate.
Fixed-rate mortgages have a set interest rate for the entire length of the loan term which is generally between 10 and 30 years. An adjustable-rate mortgage (ARM) has a term of 30 years with a low introductory rate for a fixed period followed by periodic adjustments according to a specific benchmark, typically a specific LIBOR or a T-Bill index.
Conventional loans are "conforming" if they are generally $417,000 or less for a single-family home. Conforming loan limits can be higher in pricier regions of the country. For example, in such states as Alaska and Hawaii, it's $625,500. Fannie Mae lists the loan limits here: FNMA loan Limts
To look up the loan limit for a specific address, go here: Loan Lookup Tool
There are also established guidelines for borrower credit scores, income requirements and minimum down payments. For example, most conventional loans require somewhere between 5 percent and 20 percent down.
Conventional loans have scored rate adjustments which increase the costs for lower scores and lesser down payments. If you are putting less than 20% down, you will probably need PMI (Private Mortgage Insurance) which is also scaled based on your score and down payment amount.
Conventional loans can be conforming or nonconforming. Loans above the lending limits set by Fannie Mae and Freddie Mac are called nonconforming or jumbo loans.
In addition to buying your primary residence, Conventional mortgages can be used for the following:
- Purchase a second home
- Purchase a 1-4 unit investment property
- Refinance for rate & Term
- Refinance to get cash out
- Divorce settlement
- Renovation
Conventional loans are just one option. We also offer FHA , VA , ZeroPMI and PHFA mortgage loans so we are able to compare and evaluate loan programs that best meet your specific needs. Get in touch with us today to get started.