Conventional loans
What are Conventional Loans?
Conventional Loans are mortgage loans that are not insured by the government (like FHA, VA, USDA Loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Typically, conventional loans have better rates, terms and/or lower fees than other types of loans. However, conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 5-20% and reliable monthly income. Conventional loans are ideal for borrowers with excellent credit and at least a 5% down payment.
Most Common Types of Conventional Loans
Fixed Rate Mortgages
Your interest rate and monthly payment stay the same for the life of the loan, giving you stability and peace of mind.
30-Year Fixed Loan
Benefit: Enjoy the lowest monthly payments with long-term predictability.
20-Year Fixed Loan
Benefit: Lower total interest with manageable monthly payments.
15-Year Fixed Loan
Benefit: Lower interest rate than longer terms, helping you save more and pay off your home faster.
10-Year Fixed Loan
Benefit: Build equity quickly and pay significantly less interest over time.
5-Year Fixed Loan
Benefit: Take advantage of the lowest rates and fastest loan payoff.
Adjustable Rate Mortgages (ARMs)
These loans start with a fixed rate for a set period, then adjust annually based on market conditions.
3/1 ARM
Structure: Fixed for 3 years, then adjusts annually for the remaining 27 years.
5/1 ARM
Structure: Fixed for 5 years, then adjusts annually for the remaining 25 years.
7/1 ARM
Structure: Fixed for 7 years, then adjusts annually for the remaining 23 years.
What are the Conventional Down Payment Requirements?
For Purchase transactions Conventional Loans require the home-buyer to put down at least 5% – 20% of the purchase price of the home. For a Refinance transaction, most lenders require at least 10% equity in the property.
What types of property are eligible?
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4 family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.
