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| Non FHA Conventional Loans |
A conventional loan is any mortgage which is not guaranteed or insured by the federal government. Today, although some
lenders still keep loans in their portfolio, but most are sold to Fannie Mae or Freddie Mac, both government backed buyers
of mortgage loans.
Conventional financing allows for competitive rates, up to 90% of the value of your home.
There are several categories of conventional loans. Fixed rate mortgages are simpler in some cases. A home borrower
“locks in” at an interest rate, and he or she pays down the principal and interest on the mortgage every month at that rate.
Other so-called conventional loans include conforming loans. Basically, these are arrangements that meet stipulations set
forth by Fannie Mae and or Freddie Mac.
While Fannie Mae and Freddie Mac don't actually approve or disapprove of loans, they buy and sell mortgages. Lenders
enjoy signing borrowers up with conforming loan, since they can later sell these loans to Fannie Mea or Freddie Mac to get
funds for other investments.
Nonconforming loans -- instruments which don't meet Fannie Mae or Freddie Mac qualifications -- are also considered
conventional. Another category of loans, jumbo loans, falls outside of Fannie Mae eligibility but is also considered
conventional. A jumbo loan is a loan that's too large to be eligible to be traded by the two main loan purchasers.
Current Fannie Mae guidelines for conventional homes put the maximum price for a conventional, conforming loan at just
over $417,000 for a single-family arrangement. If you live outside of the 48 contiguous United States (in Guam, Hawaii, or
Alaska), you may qualify for a larger loan limit, currently up to $729,000.
What determines the rate for your conforming loan? First and foremost, the kind of loan you want will impact pricing both in
the short-term and in the long-term. Lenders will also look at how much funds you have to close, your credit history, and
your employment history. Finally, the financial details of your final arrangement will be intimately tied up with the location of
your property and the kind of home you purchase or build.
lenders still keep loans in their portfolio, but most are sold to Fannie Mae or Freddie Mac, both government backed buyers
of mortgage loans.
Conventional financing allows for competitive rates, up to 90% of the value of your home.
There are several categories of conventional loans. Fixed rate mortgages are simpler in some cases. A home borrower
“locks in” at an interest rate, and he or she pays down the principal and interest on the mortgage every month at that rate.
Other so-called conventional loans include conforming loans. Basically, these are arrangements that meet stipulations set
forth by Fannie Mae and or Freddie Mac.
While Fannie Mae and Freddie Mac don't actually approve or disapprove of loans, they buy and sell mortgages. Lenders
enjoy signing borrowers up with conforming loan, since they can later sell these loans to Fannie Mea or Freddie Mac to get
funds for other investments.
Nonconforming loans -- instruments which don't meet Fannie Mae or Freddie Mac qualifications -- are also considered
conventional. Another category of loans, jumbo loans, falls outside of Fannie Mae eligibility but is also considered
conventional. A jumbo loan is a loan that's too large to be eligible to be traded by the two main loan purchasers.
Current Fannie Mae guidelines for conventional homes put the maximum price for a conventional, conforming loan at just
over $417,000 for a single-family arrangement. If you live outside of the 48 contiguous United States (in Guam, Hawaii, or
Alaska), you may qualify for a larger loan limit, currently up to $729,000.
What determines the rate for your conforming loan? First and foremost, the kind of loan you want will impact pricing both in
the short-term and in the long-term. Lenders will also look at how much funds you have to close, your credit history, and
your employment history. Finally, the financial details of your final arrangement will be intimately tied up with the location of
your property and the kind of home you purchase or build.
Choosing the right loan can be quite a challenge. Traditional thinking is that you should always take a generic 30 year fixed
rate mortgage, but this is not always the best loan for you. Consider these factors:
· Your current financial picture
· How you expect your finances to change
· How long you intend to keep your house
· How comfortable you are with your mortgage payment changing
For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest payments over the life of the
loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started with a lower monthly
payment than a fixed rate mortgage, but your payments could get higher when the interest rate changes.
An adjustable loan may be right for you if you oly intend to be in your home 5 years or less.
The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences
frankly with a mortgage professional.
rate mortgage, but this is not always the best loan for you. Consider these factors:
· Your current financial picture
· How you expect your finances to change
· How long you intend to keep your house
· How comfortable you are with your mortgage payment changing
For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest payments over the life of the
loan, but your monthly payments will be higher. An adjustable rate mortgage may get you started with a lower monthly
payment than a fixed rate mortgage, but your payments could get higher when the interest rate changes.
An adjustable loan may be right for you if you oly intend to be in your home 5 years or less.
The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences
frankly with a mortgage professional.
Choosing a Conventional Loan