Conventional Loans
What is a Conventional Loan?
Conventional loans are not guaranteed or insured by the Veterans Administration or FHA. The majority of conforming conventional loans follow the mortgage guidelines established by government-sponsored entities known as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).
Conventional mortgages require as little as 3% for a down payment. Loans with less than 20% down will require private mortgage insurance, as the lender is taking on more risk. Mortgage Insurance exists because Conventional Loans are not insured by the federal government, so there is no guarantee for the lender should the borrower default. Loans with lower down payments are considered higher risk for lenders and generally have more restrictive underwriting guidelines.
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Conforming Conventional loans
- Loan amounts up to $766,550 (in CO), with higher loan limits in many counties across the country.
- Loan amounts up to $766,550 (Santa Fe County NM)
- Credit score impacts mortgage interest rate
- Can put down as little as 3% (private mortgage insurance required)
- No mortgage insurance required with 20% or more down payment
- Guidelines differ slightly between Fannie Mae and Freddie Mac
Jumbo Conventional loans
- Loan amounts greater than $766,550 (in CO) up to 4 million
- Loan amounts greater than $766,550 (in Santa Fe County, NM) up to 4 million
- Jumbo guidelines vary and are typically stricter as the risk is higher
- Can require more documentation
- As low as 10% down
- 5/1- 7/1- 10/1 and 15 year fixed options
- Purchase- Cash Out Refi’s- Rate and Term Refi’s
- Credit Score of 700 or higher required
A few benefits of a Conventional Mortgage
- FHA loans require the lender to pull the disclaiming spouses credit and count obligations in the buyer’s debt to income ratio.
- Conventional loans allow for PMI to be dropped the date that the mortgage balance reaches: (a) 80% of the current property value if the seasoning of the mortgage is greater than 5 years or (b) 75% of the current property value if the seasoning of the mortgage is between 3 and 5 years. *Value for both options must be supported with an appraisal.
- Allows for down payment and closing costs to be gifted by a family member.
- Conventional mortgages offer a loan limit of $766,550 (CO) $766,550 (NM), Jumbo 4 Million
