If you are looking for a home loan, considering a conventional loan is a great place to start. As America recovers from it’s economic turmoil, equity is slowly returning to the average homeowner. You might want to again consider a conventional loan as your vehicle of choice to the American Dream.
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. The maximum limit for a conforming loan depends on the county and state you live in and can be found here: Fannie Mae Loan Limits.
Conventional loans can be either Fixed or an adjustable rate. Fixed-rate mortgages have a set interest rate for the entire length of the mortgage term which can be between 10 and 30 years. An adjustable-rate mortgage (ARM) has a term of 30 years with a low introductory rate for a fixed period followed by periodic adjustments according to a specific benchmark, typically a specific LIBOR or a T-Bill index.
Conforming loans require a down payment/equity as little as 3%* for a fixed rate term. You must also income and credit qualify. Conventional Loan guidelines are stricter than other types of mortgages, but if you can meet them and have good to great credit, then a Conventional Loan may be the loan for you.
What’s good: Conventional mortgages generally pose fewer hurdles than Federal Housing Administration or Veterans Affairs mortgages, which may take longer to process.
What’s not as good: You’ll need a higher score credit to qualify for the best interest rates.