What is a conventional loan?
Single-family mortgage amounts equal to or under the loan amount of $417,000 (known as the conforming limit in the Continental United States) are often called “conventional” or “conforming” loans and are available for purchase by Fannie Mae and Freddie Mac.
Credit qualifications and underwriting guidelines are generally more stringent on a conventional loan. Conventional loans normally require a down payment of 20%, but private mortgage insurance can be purchased if less money is applied as a down payment.
Conventional loans will not allow you to finance closing costs, however, common practice is to request the seller to pay towards your closing costs. Conventional loan programs will allow up to 3% seller credit for closing costs on 5% down payment.
Some of the other benefits of conventional loans are as follows:
Down payment can be as low as 5%-15% with PMI.
No upfront mortgage insurance.
No private mortgage insurance premium is required with a 20% down payment.
More stringent underwriting/approval guidelines are rewarded by lower rates than with FHA loans.
Standard options of fixed terms are available: 10 year, 15 year, 20 year, 25 year and 30 year.
Conventional / conforming loan qualifying ratios:
31% (house) & 43% (house & all credit debt)
Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!
Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.