Home Loan News & Advice

Conventional Loans have been one of the most popular type of loans originated and funded over the last ten years.  Recently, with the rise of FHA Insured Loans and increase in Mortgage Insurance Premiums, Conventional Loans have been cast aside for the most part.  However, if you’re Loan-to-Value is less than 80%, this could still be the best option for your mortgage.

What is a Conventional Loan?
A Conventional Loan is a loan that is ultimately purchased by Fannie Mae or Freddie Mac on the secondary market, is not a Government Loan, and is generally not larger than $417,000.  Some areas of the country have been granted an increased loan limit for generally being higher cost areas.  Check the Jumbo Conforming Loan Limits for more details.

Conventional Refinance
In most cases, a Conventional Loan refinance is limited to 90% Loan-to-Value (LTV) for the purpose of taking cash-out.  There will be a substantial amount of Mortgage Insurance involved any time the LTV exceeds 80%.  This is one of the downsides to a high LTV cash-out refinance with a Conventional Loan.  The maximum allowable LTV for a Conventional Refinance is 95%.  This is only available if the loan is considered a “rate/term” refinance where there is no cash-out and only the existing mortgage(s) are being paid off.

Conventional Purchase
Similar to a rate/term Conventional Refinance, a Conventional Purchase is limited to 95% LTV as well.  At 95% LTV, there will be a significant amount of monthly mortgage insurance included in the payment.  Seller concessions are determined by each individual lender, but at least 3% are allowed by most and up to 6% by others.

Loan Products
With Conventional Loans, there is a vast array of Loan Products.  From fixed-rates to adjustable rate mortgages, interest-only, balloons, buydowns, etc.  There are a lot more loan products involved with Conventional Loans than Government Loans.  In most cases, however, these products are not necessary.  For most Homeowners, a simple 30 year fixed is the best solution for the lower payment ranges.  20/15 year fixed is even better for long-term savings as long as you can comfortably afford the payment.  Adjustable rates and interest only terms can actually cause a lot of problems for homeowners in the long-run.  Most Conventional Loans will not have a pre-payment penalty.

Conventional Loan Limits
Check the official site of Fannie Mae for loan limit changes in your area.  For the most part, Conventional Loans are limited to $417,000.

Another good place to learn about Conventional Loans.

As always, contact me directly with any specific Questions.  That’s what I’m here for!