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What is a Conventional Loan

Conventional Loan

A Conventional loan offers the lowest interest rate and the greatest opportunity to save money on your mortgage. They are unparalleled in terms of versatility and value when it comes to home lending.

A Conventional loan is a residential mortgage that isn’t insured or guaranteed by the U.S. Government. Conventional loans are classified as either “conforming loans” or “non-conforming loans”. Conforming loans follow Fannie Mae or Freddie Mac guidelines. These entities provide the majority of home mortgage lending throughout the United States. Non-Conforming loans are mortgages that don’t comply with Fannie Mae or Freddie Mac guidelines, i.e., Jumbo loans, Foreign National loans and Bank Portfolio loans.

Conventional loans are recognized as the safest most traditional type of home finance. They can be used to purchase or refinance a home.
To

determine if a Conventional loan is the right mortgage for you, a number of factors will need to be examined:

Borrower Income: A stable job or earnings history with verifiable income that they can be counted on for repayment of the mortgage is required for a Conventional loan.

Borrower Credit: Lenders have minimum credit score requirements for a Conventional loan. Prior bankruptcy and/or foreclosure have waiting periods.

Borrower Assets: A Conventional loan requires all funds being used as down payment or closing costs to be sourced and verified.
Borrower Residency: Conventional loans are available to U.S. Citizens or Permanent Resident Aliens. Some work visas are allowed.

Property Type: A Conventional loan can be used to purchase or

refinance 1-4 unit residential properties, including; condos, townhomes, single family homes, duplexes, 3-plexes, or 4-plexes. Property type will determine down payment requirements.

Property Occupancy: A Conventional loan may be used to finance an owner-occupied Primary Residence, Second Home or Investment Property. Non-owner occupied investment properties up to 4 units are also eligible.

Mortgage Insurance: All Conventional loans with less than a 20% down payment require Private Mortgage Insurance. This borrower paid insurance premium covers some of the Lenders’ risk should the loan default.

Maximum Loan Limits: Conventional conforming loan limits are determined by geographic region and property type.

Loan Programs: With a Conventional loan, you can choose from a wide variety of Fixed Rate and Adjustable Rate Mortgage programs.

Interest Rates: With a Conventional loan, the borrowers actual interest rate is determined by analyzing all the risk factors associated with the transaction, i.e. credit score, down payment, property type and occupancy.