Considered by many to be the most common mortgage option in the industry, conventional mortgages are loans that are not government insured or guaranteed.
Guarantees are not carried by conventional mortgages for lenders in the event of a default taking place by a borrower. This leads to lenders increasing their down-payment requirements, with many wanting 20%. Conventional mortgages also highlight lower debt-to-income ratios and maintain stricter income/credit-score requirements over other various loan programs.
Rates can be fixed or adjustable, with ARMs staying flat for a determined length of time prior to the beginning of market-influenced fluctuation. While some banks do offer longer and shorter repayment terms, 15-year or 30-year options are usually the standard.
There are not any noteworthy occupancy or property restrictions in regards to conventional loans, however, they are categorized as either conforming or non-conforming. If a mortgage meets Fannie Mae and/or Freddie Mac-impose underwriting qualifications, it will be deemed conforming. Should the loan not meet the guidelines established by either government-sponsored entity, then it will be perceived as non-conforming.
The most important article of information that affects a conventional mortgage’s classification is the loan amount. Generally, loans under $417,000 are considered conforming, with loans exceeding that amount adopting the non-conforming “jumbo mortgage” label.
Once a loan is considered a jumbo mortgage (because it is greater than $417,000), borrowers will see an increase in interest rates due to the greater risk. These limits apply to residents and those looking to purchase a home in the Dallas-Ft. Worth area, where Stonebriar Mortgage is a leading mortgage company.
In the parts of the United States where housing costs are higher than normal, limits for conforming loans can be greater. For a single-unit property in a high-cost area, the limit is $625,000.
Below is a chart showing conforming loan limits for each unit-property type:
|Number of Units||Max original principal balance||Alaska, Guam, Hawaii, and U.S. Virgin Islands only|
Upon utilizing conventional loans, borrowers can find this to be a highly beneficial option to reach their goals. Not only are interest rates noticeably lower, conditions for repayment are far more favorable and processing takes place quicker.
Borrowers also find themselves granted immediate equity, plus no private mortgage is required with a 20% down payment. Once the existing mortgage insurance reaches an 80% loan-to-value ratio, borrowers are permitted to cancel. Conventional mortgages also feature reduced closing costs and fees, and it’s possible they can be folded into the loan agreement.
Another wonderful condition regarding conventional mortgages, is there is no discipline for paying off a mortgage earlier than its original terms via either selling or refinancing.
Stonebriar Mortgage provides excellent services in conventional mortgages! Call us today at (214) 669-3307 to begin exploring your options!