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Conventional Mortgage

Conventional Mortgage 2018-04-26T17:16:10+00:00

What are Conventional Mortgages?

A conventional loan generally refers to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac.  Most mortgages are conventional mortgages. Conventional mortgages can be fixed-rate or adjustable rate mortgages and typically have terms of 15 or 30 years.  Conventional mortgages can be conforming or non-conforming. Conventional mortgage loans are ideal for borrowers with excellent credit who can afford a down payment of 5% or more.

What is the difference between Fixed Rate and Adjustable Rate Mortgages?

Adjustable-rate mortgages, or ARMs, fluctuate in relation to the rate of a standard financial index, such as the LIBOR. Monthly payments can go up or down accordingly. Fixed-rate mortgages interest rate remains the same through the term of the loan; therefore payments are the same each month.

What are Conforming and Non-Conforming Loans?

Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. The Office of Federal Housing Enterprise Oversight (OFHEO) sets the criteria on what constitutes a conforming loan limit that Fannie Mae and Freddie Mac can buy.  Currently, the conforming limit set by OFHEO is $453,100 for most areas of the United States.  Loans in excess of $453,100 are considered Jumbo Mortgage Loans.

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