Conventional loans, which are not backed by the federal government, are loans that meet guidelines set forth by Fannie Mae or Freddie Mac, who provide a secondary market for mortgages. The underwriting guidelines are tighter than other types of mortgages, but the short and long term costs can be significantly lower to the borrower(s).
|Minimum Down Payment||3.00%|
|Terms (Years)||30, 25, 20, 15 Fixed and Adjustable|
|Gift Funds Allowed||Yes|
|Eligible Homes||Single & Multi-Family, Manufactured, Condo|
|Seller Paid Closing Costs||Up to 3% of the Sales Price|
|Loan Limits||$417,000 Most US Counties | $625,500 AK & HI|
|MaxDTI||43% (Higher DTI’s May Be Allowed Up To 45% max)|
|Minimum Credit Score||620 Mid-Score|
|Availability||All US States, Owner Occupied, 2nd Home, Investment|
*Other restrictions and guidelines apply. Please contact lender for full program details.
If you have good credit, have not had any major derogatory credit events in the past 7 years, and can afford to put at least 3% down, a Conventional Loan may be the right choice. Your monthly payment could be much more affordable compared to other programs such as FHA.
Fixed-rate fully amortizing loans are the most popular type of mortgage loan, as they offer a monthly payment that does not change over time, and result in a portion of the loan’s principal being paid down every month. Many borrowers find fixed-rate home loans to be an appropriate mortgage for their needs. Most fixed-rate mortgages are for loan terms of 15 or 30-years. A 30-year amortizing loan typically has lower payments than a 15-year loan, but a slightly higher interest rate than a 15-year loan.
An adjustable-rate mortgage has a short-term fixed-rate term during which an interest rate is fixed. After this initial term, the interest rate on an adjustable-rate mortgage or “ARM” loan can change periodically at certain intervals. This adjustment permits the lender to adjust the interest rate to match changing interest rate environments. For example, a 3/1 ARM loan offers a fixed-rate for the first three years, adjusting once a year thereafter. A 5/1 ARM loan offers a fixed-rate for the first five years, adjusting yearly thereafter. At each adjustment the lender sets the interest rate by adding a margin or spread to the then current index rate.