Conventional Loans

Conventional loans are mortgage loans offered by non-government sponsored lenders. These loan types include:

  •  Fixed Rate Loans
  • Jumbo / Construction Loans

Usually, a conventional loan is a 30-year or 15-year fixed rate mortgage. That means it has a fixed interest rate for the 30 or 15 year term of the loan. Conventional loans also typically require at least a 5-20 percent down payment. For example, if a house costs $200,000, the lender will provide a loan for 80 percent of that amount. So, $160,00 is financed through the lender and the borrower must pay $40,000 cash.

Conventional loans can have better interest rates than non-conventional loans and can be a great option for those with a 20 percent down payment. However, even if the borrower does not have a 20 percent down payment, it is still possible to get a mortgage. By putting less down and accepting a possibly higher interest rate, the borrower can still get financing through a non-conventional loan although they can get away with putting as little as 5% down.

While conventional loans are not insured by any government agency, these loans do adhere to specific guidelines. The guidelines that conventional mortgage lenders follow are set by Fannie Mae or more formally known as the Federal National Mortgage Association (FNMA). Fannie Mae was created by the federal government and is one of the biggest buyers and sellers of conventional loans.

General Loan Limits for 2014

The general loan limits for 2014 remain unchanged from 2013 (e.g., $417,000 for a 1-unit property in the continental U.S.).

Maximum Original Principal Balance for 2011
Units Contiguous States, District of Columbia, and Puerto Rico Alaska, Guam, Hawaii, and the U.S.Virgin Islands
1 $417,000 $625,500
2 $533,850 $800,775
3 $645,300 $967,950
4 $801,950 $1,202,925

 

Call 800-725-9902 to schedule a strategy session with a Home Mortgage Expert