What is a Conventional Mortgage?
A Conventional Mortgage is simply any mortgage loan that is not insured or guaranteed by the federal government. Conventional Mortgages typically require a higher down payment, usually 5%–20%. They also have higher income and credit score requirements than government loans.
Conventional Mortgages can have a fixed interest rate or an adjustable interest rate. Typical fixed-rate loans have a term of 30 or 15 years. However, Academy Mortgage offers 30-year, 25-year, 20-year, 15-year, and 10-year fixed-rate options.
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With an Adjustable-Rate Mortgage (ARM), the interest rate stays constant for a term and then fluctuates based on market conditions. Academy offers a 10/1 ARM, 7/1 ARM, 5/1 ARM, and 3/1 ARM.
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Conventional Mortgages are also categorized as conforming or non-conforming. If a loan meets the underwriting requirements set forth by the government-sponsored entities Fannie Mae and Freddie Mac, it is considered a conforming loan. If a loan does not meet all these requirements, it is considered a non-conforming loan.
One of the main factors that determine whether a mortgage is conforming is the loan amount. Generally, a mortgage with a loan amount below $417,000 is considered conforming, whereas any loan amount above $417,000 is considered non-conforming, or a Jumbo Mortgage. Conforming limits may be higher in areas of the country with more expensive housing; for example, the conforming limit is $625,500 in Alaska and Hawaii. Jumbo Mortgages usually have a higher interest rate because they carry greater risk.
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What are the benefits of a Conventional Mortgage?
Conventional Mortgages offer the following features:
- Buyer has immediate equity in the property.
- No private mortgage insurance is required with a 20% down payment, which is a great advantage.
- Lower closing costs and fees.
- Closing costs and fees may be included in the loan.
- Repayment terms are generally more favorable.
- Fewer bureaucratic hurdles, making the loans quicker to process.
- No government stipulations and prepayment penalties if you sell or refinance your house.
Who may benefit from a Conventional Mortgage?
Conventional Mortgages are ideal for buyers with excellent credit who can afford a down payment.
For more information
Contact your Loan Officer today to see if a Conventional Mortgage is the right solution for you. We take pride in delivering value and savings to homebuyers across the United States. It would be a pleasure to help.