Conventional Loans: Rates and Terms for All
When it comes to home financing, there are two main divisions of mortgages: conventional and nonconventional loans. Conventional loans are what you might think of as a traditional mortgage: they’re fully funded and insured through private lenders. Nonconventional loans are secured in some way by government agencies. Because they’re not regulated by federal departments, conventional loans have a wide and flexible array of terms and some of the most competitive interest rates. If you’re interested in learning more about conventional loans, contact Prosper First Funding Corporation – Nima Rezvan. Nima has local expertise and connections with top national lenders for conventional loans in Fairfield, Stamford, Norwalk, and Trumbull, CT.
Unlike nonconventional loans, conventional mortgages aren’t subject to any income limitations, loan limitations, credit requirements or other standards imposed by government agencies. This can be good and bad for you as a borrower. Because they aren’t insured or guaranteed by the government, conventional loans pose more of a risk to lenders. This means lenders are more selective about who is and isn’t approved. If you have good credit and are in good financial standing, however, you can reap huge rewards from conventional financing, like:
- Competitive interest rates, which are often better than nonconventional rates
- Flexible terms, from 10-30 years
- Fixed- and adjustable-rate interest options
- No required private mortgage insurance (PMI) after 20% equity is achieved
Conforming and Nonconforming Conventional Loans
There are two main divisions of conventional loans: Conforming and nonconforming loans. Fannie Mae and Freddie Mac are two government-sponsored entities (GSEs) that buy certain mortgages off the books of private lenders. These GSEs are not government agencies and should not be confused with nonconventional loans. GSEs purchase loans from individual lenders, repackage them and sell them as securities on the public market. They set a maximum limit on the loans they will purchase, to mitigate their own risk. Loans that do not exceed the limit are conforming loans, and loans that exceed it are nonconforming loans. Limits vary by county; since Fairfield County is quite affluent, the limits are higher than the national average. They are:
- $601,450 for a one-unit property
- $769,950 for a two-unit property
- $930,700 for a three-unit property
- $1,156,650 for a four-unit property
Nonconforming loans, also known as “jumbo loans,” stay on lenders’ books, which means they’re riskier to lenders and more difficult to qualify for as a borrower. You should have good or better credit, a low debt-to-income ratio, proof of sufficient income to make your mortgage payment and proof of additional cash reserves. You’ll need to provide at least 20% down for a jumbo loan. Many jumbo loans have adjustable interest rates (ARMs) because borrowers can save up front during the first few years, then refinance to a fixed rate after paying down part of the mortgage.
The Expertise and Guidance You Need
If you’re interested in conventional loans, Prosper First Funding Corporation – Nima Rezvan has the expertise and local knowledge you need. Nima works with borrowers in Fairfield, Stamford, Norwalk, and Trumbull, helping each find the right loan for his or her needs. Contact us when you’re ready to learn more.