What is a Conventional Home Loan?

Mortgage

 

If you are looking for a home loan, considering a conventional loan is a great place to start. As America recovers from its’ economic turmoil, equity is slowly returning to the average homeowner. You might want to again consider a conventional loan as your vehicle of choice to the American Dream.

Definition

A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have either a fixed or adjustable rate. The maximum limit for a conforming loan depends on the county and state you live in and can be found here: Fannie Mae Loan Limits.

Conventional loans can be either Fixed or an adjustable rate. Fixed-rate mortgages have a set interest rate for the entire length of the mortgage term which can be between 10 and 30 years. An adjustable-rate mortgage (ARM) has a term of 30 years with a low introductory rate for a fixed period followed by periodic adjustments according to a specific benchmark, typically a specific LIBOR or a T-Bill index.

Requirements

If you in income and credit qualify and want to purchase a new home or merely lower the rate or term of you existing home, a Conventional loan may be what is best for you. Conforming loans require a down payment/equity as little as 3%* for a fixed rate term or 10%* for an Adjustable rate.
If you need to take cash out for any purpose Conventional financing will allow you to borrower up to 85%* of your home’s value. You can apply for pre-approval of a loan which helps you determine what you can afford to borrow (pre-approval is not guaranteed) or you can apply for a loan after you find a property you are interested in buying. Always check with your Loan Officer for specific guidelines.

Getting the Loan

If you would like to see if you will qualify for this loan, contact one of our Licensed Mortgage Loan Originators by clicking here.

 

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6 thoughts on “What is a Conventional Home Loan?

    • Hi Terri –

      One of our Branch Managers, Tim Rhodes, stated: “On fixed rate mortgages, the principle and interest portion of your payment will stay the same for the entire loan term. If you escrow your taxes and insurance, the escrow portion of your payment may go up or down as your homeowners insurance premiums or yearly real estate taxes change.

      Mortgage loans can be paid off early by paying additional principle towards the loan. This can be accomplished by paying a little extra each month or even just when you have extra to pay. Every dollar paid over your required payment amount will be applied to the principle balance of the loan, therefore allowing you to pay off the loan faster than the loan term. You can also pay the loan off early by sending a lump sum amount at any time during the loan or at the end of the loan term paying it off in full. Again, each dollar paid will go towards the principle balance of the loan. By making additional principle payments, you end up paying less interest than you normally would by just making your regular scheduled payments.”

      If you have any other questions or would like more information about mortgages, please contact us at info@nfmlending.com.

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