By definition, conventional loans are any home loans that are not guaranteed or backed by a government agency. Government-backed loans such as FHA loans or USDA loans are typically tailored to families with lower income and credit scores. Conventional loans on the other hand tend to be popular among borrowers with higher income and credit scores. Fairway Independent Mortgage Corporation offers a number of different conventional loan options designed to meet the needs of Georgia and Florida residents throughout Atlanta, Miami, and Orlando.
Conforming vs Non-Conforming Loans
Conventional loans are classified as either conforming or non-conforming loans. The two entities Fannie Mae and Freddie Mac purchase mortgages from lenders which are resold to investors. In order to be purchased by one of these entities, a loan must meet certain criteria. Loans that meet these criteria are conforming loans and those that do not are non-conforming loans. The size of the loan is one of the first factors looked at when determining eligibility. Home loans must remain under $417,000 to meet eligibility. Loan amounts can reach up to $625,500 and still be considered eligible in certain high-cost counties. There are also debt-to-income (DTI) and documentation guidelines that lenders must follow as well to maintain eligibility.
Loans that do not meet Fannie Mae and Freddie Mac’s criteria are ineligible for purchase and are considered non-conforming loans. The most common non-conforming loan is the jumbo loan. A jumbo loan is simply a loan greater than the conforming loan limit for a particular area. For homeowners looking to purchase higher-priced or luxury homes, Jumbo loans can be a great choice. Since these loans cannot be sold to Fannie Mae and Freddie Mac, lenders may need to keep the loans in their own portfolio. In some cases, this could mean higher rates, down payment requirements, and insurance premiums.
Fixed-Rate vs Adjustable-Rate Mortgages
Borrowers have the option of choosing between fixed-rate mortgages, adjustable-rate mortgages (ARMs), or a combination of the two, referred to as hybrid ARMs. There are advantages to each type of rate depending on your personal needs.
Fixed-rate mortgages are most commonly available as either 15-year, 20-year, or 30-year loans. No matter the length of the loan term, a fixed-rate mortgage will maintain the same rate throughout the life of the mortgage. Fixed-rate mortgages are often preferred as they give peace of mind knowing that your mortgage payment will not change despite market fluctuations.
Interest rates on an adjustable-rate mortgages will vary from time to time depending on current market rates. Hybrid ARMs take components from both fixed rate and adjustable rate mortgages. A 7/1 Hybrid ARM begins with a 7-year fixed period. Each year thereafter there will be an adjustment to the rate. ARMs often start out with a lower rate than comparable fixed-rate mortgages meaning you will pay less early on. ARMs and Hybrid ARMs can be valuable options for someone who plans to relocate in the near future.
Fairway Independent Mortgage Corporation offers many conventional loan options throughout St Mary’s , Kingsland , Woodbine, Folkston, Brunswick , Jacksonville . Whether you are looking to purchase your very first home, or are considering refinancing the mortgage on your current home, we have a conventional loan option that will meet your specific needs. For more information on our conventional loan products, contact us today.
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