Conventional Loan Programs
Highlights of the Conventional Mortgage program:
- Allows for the purchase or refinance of single family second homes
- Allows owner-occupants and investors to purchase or refinance 1-4 units, townhouses, approved condos, or Planned Unit Developments (PUDs)
- Allowable seller contributions depend upon the down payment and occupancy
- No first-time home buyer restrictions
- Co-signers are allowed to help buyers qualify for single family residences
- Conforming loan limits apply
What is a Conventional Mortgage?
A Conventional loan refers to a mortgage that follows the guidelines of government sponsored enterprises (GSEs) such as Fannie Mae or Freddie Mac but is not guaranteed or insured by the federal government.
Conventional mortgages can be classified as conforming or non-conforming. A conforming loan meets the parameters set forth by Fannie Mae or Freddie Mac while a non-conforming loan is one which exceeds the maximum loan limits established by these GSEs.
How a Conventional Mortgage works:
Conventional loans can be insured or uninsured. The insurance for conventional loans is referred to as Private Mortgage Insurance (PMI) and is a policy issued to provide protection to the lender in the event of financial loss due to a borrower’s default. Generally, a loan over 80% of the property’s value will require PMI insurance.
A strong credit history is a typical requirement for a conventional mortgage. Lenders tend to offer lower rates to borrowers who have clean credit histories and higher credit scores.
Conventional programs typically require a 5% down payment which must come from the borrower’s own funds. After this initial 5%, the remaining funds may be a gift to the homebuyer from a conventional allowable source. Gift funds that meet or exceed 20% of the property’s value do not require a minimum buyer contribution.
Conforming loan limits are set by Fannie Mae and Freddie Mac (GSEs) and are evaluated on an annual basis.
Purchase and refinance transactions are eligible for conventional loan programs.
You will benefit from the Conventional loan program if you:
- Have a 20% or greater down payment
- Need financing for a second home or an investment property
- Desire the ability to waive the requirement to escrow for taxes and insurance with a down payment of 20% or greater
- Need to finance a property that exceeds FHA loan limits
- Are looking for flexible PMI requirements for loans with down payments less than 20%
Conventional loans are not insured by the FHA or VA. Usually, these are a good option for homebuyers with strong credit history and stable employment status.
A HomeStyle® Renovation Mortgage allows for the financing equal or up to 50% of your property's post-renovation value and is available for new and existing homes.
HomeReady® is a Fannie Mae loan program that is designed to help buyers with low to moderate incomes attain their home ownership goals.
Home Affordable Refinance Program (HARP)
The Home Affordable Refinance Program (HARP) is available to homeowners who are current on a mortgage that is owned by either Fannie Mae or Freddie Mac and owe as much if not more than their home is worth.
High Balance/Super Conforming
High Balance/Super Conforming mortgage programs provide lower mortgage financing costs to borrowers who are located in the country’s highest cost areas.