The conventional loan comes with either a fixed or adjustable rate and is not guaranteed by the U.S. Government, unlike VA, FHA, and USDA loans. A few additional details:
- Also known as Conforming Loans, conventional mortgages conform to guidelines set forth by either Fannie Mae or Freddie Mac, rather than by the lender.
- Reliant will continue to service your loan (i.e. to collect payments and pay escrows) even after Fannie Mae acquires it.
- If you put down less than 20% on the purchase price, you’ll need to purchase Private Mortgage Insurance (PMI), which will increase your monthly payment somewhat.
- The maximum mortgage amount for a single-family home is $417,000.
Qualifying for a conventional mortgage can be more challenging, but the rewards are worth it! Let’s take a look at the benefits of a fixed-rate conventional loan.
- Lower overall monthly mortgage payment than FHA options
- Flexible sources of funds for closing
- Eligibility for primary residences as well as vacation and investment homes
- Down payments as low as 3%
- Mortgage term options from 10–30 years
- Most borrowers are able to cancel PMI in time
Wondering about the benefits of an adjustable-rate conventional mortgage?
- Lower interest rates during the initial, fixed-rate period translate to lower mortgage payments starting out
- Payment of additional funds to reduce the balance will lower the payment after the initial period
- Least expensive option for shorter-term ownership, such as designed relocations