Conventional MortgagesA Conventional mortgage is the most common home loan type.
They are offered by Fannie Mae and Freddie Mac versus FHA, VA, or the USDA. Since they are not insured by the federal government, they usually have higher down-payment, credit score, and income requirements than government loans.
Conventional Loans are classified as conforming or non-conforming. Conforming simply means that the loan meets Fannie Mae and Freddie Mac’s established underwriting guidelines. If a loan does not fall within these guidelines, it is considered a non-conforming loan.
The main factor that determines whether a loan is conforming eligible is the loan amount. The maximum conforming loan amount is $453,100 in most states. Mortgages with loan amounts above this limit are considered Jumbo mortgages. Jumbo loans are still offered through Fannie Mae and Freddie Mac, but they are treated with different underwriting guidelines than conventional mortgages. Higher interest rates are common for non-conforming Jumbo loans because they carry higher risks.
Fixed or adjustable-rate mortgage (ARM) structures are available for Conventional loans. Fixed rate mortgages maintain the same rate and payment, subject to temporary mortgage insurance if applicable, throughout the life of the loan. The most common fixed-rate mortgages carry a 30 or 15 year repayment term. An ARM maintains the starting interest rate for a portion of the repayment term and then adjusts based on interest rate market conditions subject to the option selected.
Conventional mortgages require a minimum 5% down payment in most cases, whereas government loan types require a minimum 3.5% down payment or less. You will also be required to include monthly PMI in your payment if you put less than 20% down on your loan. PMI stands for Private Mortgage Insurance and in short, PMI protects your lender against a complete loss of money if you default on your mortgage payments.
Benefits of a Conventional Mortgage
- Lower Monthly Payments
- Lower Fees and Costs at Closing
- Mortgage Insurance Not Required with 20% Down Payment
- Investment Property Types Eligible
- Less Stipulations for Selling or Refinancing
- Looser Collateral (Property) Guidelines
Contact Us today if you would like to discuss conventional loan products further or if you have any inquiries about our product offerings. If you do not have any questions and are ready to submit your information for a loan decision, please Apply Now.
Thank you for letting Starboard Financial show you -The Right Way- in mortgage lending!