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Conventional Conforming Home Loans

Conventional loans make up the majority of loans that are made in this country, and come with the best terms available, particularly for highly qualified borrowers. Conventional loans are not offered by, guaranteed, or insured by the government.

A “conforming” loan is a mortgage that is equal to or less than the dollar amount established by the conforming-loan limit set by the Federal Housing Finance Agency (FHFA) and meets the funding criteria of Freddie Mac and Fannie Mae.  The conforming limit varies by state, county and whether the property is one, two, three or four units. Amanda & team can help guide you on what the conforming limit is in the area you would like to purchase.

 

How Conventional Home Loans Work

  • Conventional loans have interest rates and pricing that are tiered by both credit scores and down payments. You’ll find better terms on conventional loans with every 20 points that your credit score rises (680, 700, 720, and so on).
  • You’ll most likely find better terms on conventional loans typically with every additional five percent down payment, up until you reach forty percent down. There are some scenarios where this may not be the case.
  • Conventional loans have the most options that you may consider. You can find a fixed rate term as short as ten years, or as long as thirty years.
  • You can find an adjustable rate mortgage, with a 30 year amortization, but with a starting rate lasting for as little as three years or as long as fifteen years.

    • This means that the initial interest rate will be set for 3, 5, 7, 10  or 15 years. The shorter the term you request your rate to be set, the lower the starting interest rates.

    • Be aware that in some instances you may need additional money down to acquire an adjustable rate loan.

  • If you put less than 20% down on a conventional loan, you will be required to have some form of private mortgage insurance (PMI). There are a few options to consider while we structure your loan to save you money on mortgage insurance.

    • Monthly mortgage insurance – pay a monthly fee until you build 20-22% equity in the property at which point you can either request that your PMI be canceled, or it will drop off automatically

    • Lender paid mortgage insurance – Increase your mortgage interest rate instead of paying monthly mortgage insurance.  With this option, keep in mind that your interest rate will remain the same over the life of the loan (unless you refinance), whereas with monthly PMI, it goes away after a certain number of years. This is a good option for someone who plans to hold their loan for a shorter amount of time.

    • Upfront mortgage insurance – Typically the cheapest option provided you have the funds to buy out the mortgage insurance in advance. This cost is due at closing as a part of closing costs. It is not a good option if you plan to pay off the loan quickly, or build equity to 20-22%, within three years.

 

Have questions? Give us a call! Amanda and team would be happy to answer all of your questions and get you started today!

Working with Amanda & Team

    • We put YOU first.
    • Fast and efficient, we close most of our loans in 30 days or less.
    • We offer a variety of loans. Amanda & team can help you find the loan that is right for you!!!
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