Conventional Mortgages

A conventional mortgage is a type of mortgage in which the terms and conditions of the loan meet the criteria set forth by Fannie Mae and Freddie Mac. A conventional mortgage can be defined as either a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM). 

A fixed rate mortgage is classified as having the same principal and interest payment for the life of the loan, while an ARM is identified by having a fixed rate for only a specified period of time before the rate becomes variable, depending on market conditions.

Many times, people confuse a conventional mortgage with a conforming mortgage. 

However, a conventional mortgage can be both conforming or non-conforming (jumbo). 

 Because conventional loans are set by Fannie Mae and Freddie Mac, the easiest way to identify if a loan is conventional or not is to know whether or not the loan is government insured. Typical government-insured loans are FHA (Federal Housing Administration), VA (Veterans Affairs) or USDA (United States Department of Agriculture) Rural Development loans. Fannie Mae and Freddie Mac are considered stockholder-owned corporations.

The most common conventional mortgage terms are fixed for 30 and 20 years, however, you can get other fixed-rate loans for 10-, 15-, 25- year terms. There are also 3/1, 5/1, 7/1 and 10/1 ARMs.

You do not need 20% down for a conventional mortgage.  You can get a conventional mortgage with as low as 5% down but you will have to pay mortgage insurance and it will depend on your credit score to determine whether you can get mortgage insurance or not.

Downpayment Options

I have received many calls and heard may people say that they can't afford to buy a home because they don't have 20% down.  There is nothing further from the truth than that.





*  There is a fabulous loan for Rural Areas that is called USDA Rural Housing Development, this Loan has income limits please see the link below to check income limits on your State

http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html

With this Link you can check Eligibility

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

This Loan is not for everybody but it is a great loan because you don't have to put any downpayment and the best thing is that you have NO Mortgage Insurance, which could result in very good savings in the long run.  I will go into detail later on in a different post.

*  FHA - The Federal Housing Administration, promotes different types of programs to promote home ownership.  FHA is one of them, this program allows you to get into a house with as little as 3.5% down.  This loans in this market are the most popular, but are not for everybody.   They are easy to qualify as you don't have to have perfect credit, just decent credit.  You can check the link below to see what is the Max Loan amount you can get in your area:

https://entp.hud.gov/idapp/html/hicostlook.cfm


*  VA - This loan is guaranteed by the Veterans Administration.  This loan is good for Veterans.  You can get a loan for 100% Financing, meaning NO down payment and NO Mortgage Insurance.

Check the following Link for Eligibility

http://www.benefits.va.gov/homeloans/elig_center.asp

*  Conventional Loans - This loan is your standard 30 year or 15 year Mortgage, pretty much you have to have good credit, your debt-to-income ratios need to be in line.  Even for these type of loans you can come up to the table with as little as 5% down.  Your Mortgage Insurance will be then high but still you will have an option to come to the table with that little down payment.  You will need to have 20% down in order to avoid paying mortgage insurance.

In order to make a decision on how much down you need to put and which loan program is best for you, review your options with your Lender, they will be able to help you and I am sure they will help you decide which loan will better suit your needs.  These are not the only types of loans you can get either, maybe your lending institution has a portfolio loan or another one that will work for you best.