Applying for a home loan can be confusing and nerve-wracking for anyone, especially first-time home buyers. You work hard and go through a gamut of emotions just to find your dream home, and then comes the part where you have to complete the financing process! One of the most basic concepts home buyers need to grasp is the different types of loans available to them. In this post, we’ll cover the basics about a conventional mortgage.
Part 1: What is a Conventional Mortgage?
When you apply for a home loan you have several of different products available to choose from, but the most common are conventional loans or government insured loans. Government insured loans, such as VA, FHA, AND USDA loans, are insured by agencies within the federal government. Conventional loans, on the other hand, are Underwritten to the guidelines of Fannie Mae (the federal national mortgage association or FNMA) or Freddie Mac (the federal home loan mortgage corporation, or FHLMC) who provide the backbone for the secondary mortgage market. Fannie Mae and Freddie Mac purchase loans from primary lenders to help them fill their coffers and make more home loans to consumers. Conventional loans, on the other hand, are insured through private companies.
Conventional mortgage loans meet Fannie Mae and Freddie Mac guidelines for the size of the loan and your personal financial situation. Conventional mortgages are attractive to most borrowers because they often feature more attractive terms than jumbo or government insured loans.
Conventional Mortgage Rates
Conventional home loans are available in both fixed or adjustable rate options. A “fixed-rate” mortgage refers to a product that offers an interest rate that won’t change for the life of your loan. This is a great option people who plan on living in their home for many years and want to know exactly what their monthly payments will be for the duration of the loan. Read more