Conventional Mortgage Loans
Conventional or conforming loans refer to most mortgages not backed by the federal government. These loans follow the terms and conditions set by Fannie Mae and Freddie Mac, government-sponsored institutions that are the largest purchasers of mortgages in the United States.
A conventional mortgage comes with stricter approval standards than government loans, so it’s generally best for borrowers that have a higher credit score, stable employment and income, and a debt-to-income ratio of less than 45%.
A common misconception about conventional mortgages is that a 20% down payment is required. However, down payment requirements may vary based on your situation. A lower down payment of 3% is possible in combination with paying for private mortgage insurance (PMI), which is included in your monthly mortgage payment.
Benefits of a Conventional Loan
Competitive pricing
No prepayment penalty ever
Option for no mortgage insurance (PMI)
Up to 45% debt-to-income (DTI) ratio
Allows for 3% seller-paid closing costs
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Loan amounts up to $647,000 in low cost areas: $947,800 in high cost areas
3%, 5%, 10%, or 20% or more down
Do not need to be a first time buyer
Available with or without mortgage insurance
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Competitive interest rates
Loan amounts up to $647,000 in low cost areas; $947,800 in high cost areas
30yr, 25yr, 20yr, 15yr, or 10yr
Fixed or adjustable rates available
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Up to 80% LTV
Competitive interest rates
Payoff a 2nd mortgage or HELOC
Cash out to pay off high-interest debt