Conventional Loans

What are Conventional Loans?

Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have good rates, terms and/or lower fees than other types of loans. However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 1% or more, and reliable monthly income.

 

Most Common Types of Conventional Loans

Fixed Rate Mortgages: Your rate and payment never change.

  • 30 Year Fixed Loan 
    Benefits: Lowest fixed monthly payments.
  • 20 Year Fixed Loan
    Benefits: Low fixed monthly payments, lower interest rate.
  • 15 Year Fixed Loan
    Benefits: Lower rate; Pay less interest and pay your home off quicker.
  • 10 Year Fixed Loan
    Benefits: Lower rate; Pay off your loan and build equity faster.
  • 5 Year Fixed Loan
    Benefits: Lowest rate; Pay off your loan and build equity the fastest

Adjustable Rate Mortgages: After the initial period your interest rate can change once a year.

  • 3/1 ARM Fixed Rate for 3 Years, Adjustable Rate for the remaining 27 years.

  • 5/1 ARM Fixed Rate for 5 Years, Adjustable Rate for the remaining 25 years.

  • 7/1 ARM Fixed Rate for 7 Years, Adjustable Rate for the remaining 23 years

 

What are the Conventional Down Payment Requirements?

For Purchase transactions Conventional Loans require the homebuyer to put down between 3-20% of the purchase price of the home. For a Refinance transaction, most lenders require between 5-10% equity in the property. If you don't have enough equity to qualify for a conventional refinance, even if you owe more than your home is worth, you might be eligible for a HARP 2.0 Loan.

 

What types of property are eligible?

Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.

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