Conventional Loans

Conventional loans are mortgage loans offered by non-government sponsored lenders. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate.While many think that a 20% down payment is required for all conventional loans, many lenders now offer low down payment options.

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 better 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 1-20% and reliable monthly income. Conventional loans are ideal for borrowers with excellent credit and at least a 1% down payment.

Most Common Types of Conventional Loans

The most common conventional loans are fully-amortizing fixed rate loans and hybrid fixed/adjustable rate loans that start out fixed and then become adjustable for the remaining life of the loan.

Fixed rate mortgages: The rate and payment on a fixed rate mortgage never change. The most common fixed rate loan is 30 year fixed because it has the lowest payment. 15 year fixed loans are used by homeowners who want the lower rate of the 15 year loan and who want to save interest over the life of the loan; these two benefits are achieved because the monthly payment is typically about 30% higher than with a 30 year fixed loan.

There are other fixed mortgage terms, such as 25, 20 and 10 year. Since these are much less popular with consumers the rates do not tend to be any improvement over 15 and 30 year loans.

Fixed/adjustable hybrid loans: These loans come in 3/1, 5/1 7/1 and 10/1 varieties, meaning that the rate is fixed for 3, 5, 7, or 10 years and then adjusts annually for the remainder of the 30 year loan term. These are designed for consumers who believe they will move, refinance or pay off their loans within the fixed rate period, as the rate can move up substantially after the fixed rate period.

Requirements and Qualifications for conventional loans.

Loan amount – The loan amount for a conforming mortgage is generally limited to $424,100 for a single-family home, though limits may be higher in regions where home prices are higher. Jumbo loans allow you to exceed the conforming loan limit to borrow for a higher-priced home.
Down payment – Most conventional loans will require at least 5 percent (and optimally 20 percent or more) as a down payment. For loans with lower down-payment requirements, explore government-backed mortgages like VA loans and FHA loans.
Credit history – Conventional loans are a good choice for borrowers with excellent credit, which generally means a FICO score of 660 or higher. There are also established guidelines for income and other personal financial information.

About The conventional loans 97 LTV Program

The Conventional 97 loan is another low down payment option available to today’s mortgage borrowers. Available via Fannie Mae and Freddie Mac, the program was recently retooled to be cheaper and easier to use. For example, as compared to the original Conventional 97, the newest version is available to first-time buyers and repeat buyers alike, where “first-time buyer” is defined as a person who has not owned a home in the last three years. This definition of first-time buyer means that consumers who lost a home to foreclosure last decade can be Conventional 97-eligible under the program’s new rules. Furthermore, because Conventional 97 allows for cash gifts for down payments, home buyers are not required to make a down payment from their own funds. Monies may be 100% gifted from parents and relatives. The only requirement is that the gift is actually a gift — down payment “loans” are disallowed. For eligible borrowers, the rules of the Conventional 97 program are straightforward. The Conventional 97 program requires a minimum downpayment of 3%, only 30-year fixed rate mortgages are allowed, and the loan must be used for a primary residence. Beyond that, there is very little to distinguish a Conventional 97 loan from any other conventional mortgage type. Borrowers are required to verify income and employment; the program can be used to refinance a home; and, home buyer counseling is not required. And, like other conventional loans, because Conventional 97 loans feature less than twenty percent home equity, they require borrowers to pay private mortgage insurance (PMI). With all Conventional 97 loans, though, PMI cancels when the loan reaches 80% LTV. That is, when the homeowner has 20% equity in its home.

If you are looking to purchase a home or refinance with a conventional loan in Lake Mary, Longwood or Sanford as well as the whole state of Florida contact Dan O'Brien | Emerald Mortgage Partners today at (407) 392-1904.