Conventional Mortgage Loans
A conventional mortgage loan is a loan that is not guaranteed or insured by the federal government. Conventional loans typically have better rates, lower costs, and flexibility when it comes to home buying. About 60% of all mortgage applicants choose a conventional mortgage loan as their loan option.
Conventional Loan Guidelines:
- Loan amount for a single-family Texas home is $424,100
- A conventional loan can be used to purchase a primary residence, second home, or rental property
- Available in fixed rates, adjustable rates (ARMs), and offer a variety of loan terms usually from 10 to 30 years
- Down payments can be as low as 5% (only on certain programs)
- Good credit scores (typically 720 FICO and higher) are required for
- Monthly mortgage insurance not required with a 20% down payment
- Mortgage insurance can be cancelled when home equity reaches 20%
- Mortgage insurance costs are lower than FHA
Types of Conventional Loans:
Loans that "conform" to the guidelines set by Fannie Mae and Freddie Mac are called "conforming" mortgages. Approximately half of all conventional loans are conforming loans as well. In turn, all conforming loans are conventional.
Non-Conforming Loans are mortgages that do not fit the Fannie Mae and Freddie Mac guidelines. They are qualified as such because the property type or borrower's financial status does not meet universal standards, or the loan amount is higher than the conforming loan limit of $424,100.
Jumbo Loans are mortgages that do not fit in the Fannie Mae and Freddie Mac guidelines because the amount financed for a single-family home exceeds the regulated loan limit of $424,100. Click here to find out more about Jumbo Loans.
Portfolio Loans are mortgages that stay within the financial institution that issued the money, and are serviced by the lending financial institution. In other words, portfolio loans are not sold to the secondary market.
A Non-Prime or Non-QM Loan (non-qualifying mortgage loan) is not inherently high-risk not is it subprime. Rather, a Non-QM loan is simply a loan that does not fit into the complex rules associated with a QM Loan. In fact, many of these loans may actually have borrowers that have good FICO scores, along with other strong borrower attributes like steady jobs and plentiful assets. However, because of the rules and scrutiny associated with Non-Prime lending, banks are able to choose if they want to keep these loans instead of selling them to other investors.
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