Have you ever wondered what the difference is between the various mortgage loan types? Or were you unaware that there are many different types of loans meant to address specific borrower needs? Just as no two borrowers are exactly alike, no two loan programs are set up precisely the same way.
One of the most common loan types available is a Conventional mortgage loan.
What is a Conventional mortgage loan?
A Conventional mortgage is a type of loan that is not guaranteed or insured by a government entity such as the Federal Housing Administration (FHA) or the Department of Veteran Affairs (VA). Conventional loans are made available through private lenders such as banks or mortgage companies, or by one of the two government-sponsored enterprises (GSEs) known informally as Fannie Mae and Freddie Mac.
Conventional loan types include the following:
- Conforming loans – Loans that conform to guidelines set forth by Fannie Mae and Freddie Mac.
- Non-conforming loans – Loans that do not follow GSE guidelines.
- Portfolio loans – Loans held by mortgage companies and not sold off in the secondary market.
- Sub-prime loans – Loans offered at a higher rate to people who don’t qualify for prime rate loans.
Conventional Mortgage Loan Features
As with any loan product, there are a variety of factors that must be met when applying for a Conventional mortgage. A few of those requirements are as follows:
- Down payments – Most Conventional loans require down payments between 5 percent and 20 percent; however, some allow for as little as 3 percent down.
- Option for no mortgage insurance – If a borrower puts 20 percent down, or has at least 20 percent equity in the home, they are not required to purchase mortgage insurance.
- No loan limit cap – Non-conforming loans have no lending limit.
- Flexibility – Conventional loans are offered by almost all lenders and can be used to purchase any type of property (condos, townhomes, secondary homes, investment properties, etc.).
Is a Conventional mortgage the right loan for me?
So how do you know which type of loan is right for you? That’s where it helps to have a knowledgeable loan officer by your side. A good loan officer will listen to your needs, evaluate your specific situation, educate you on different loan products and help you select the right loan for you.
Castle & Cooke Mortgage, LLC® (NMLS #1251) is a leading independent mortgage lender headquartered in Draper, Utah, with locations across the United States.
Restrictions may apply. Not all who apply will qualify. Program qualifications & offerings are subject to change at any time. Equal Housing Lender. Castle & Cooke Mortgage, LLC is licensed in AL, AR, AZ, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, KY, MD, MI, MS, MO, NE, NV, NM, NC, ND, OH, OK, OR, TN, TX, UT, WA, WI and WY. Castle & Cooke Mortgage, LLC is licensed by the Arizona Department of Financial Institutions Arizona Mortgage Banker: BK-0908287. Castle & Cooke Mortgage, LLC is licensed by the Department of Business Oversight, under the California Residential Mortgage Lending Act License #4130740. In Colorado, Castle & Cooke Mortgage, LLC is regulated by the Division of Real Estate. Georgia Residential Mortgage Licensee, License #43759. Illinois Residential Mortgage Licensee. Oregon Mortgage Lending License #ML-4090. Licensed by the Mississippi Department of Banker and Consumer Finance.
Information contained in this this Blog does not constitute legal, financial, or other professional advice or services and should not be used as a substitute for professional advice. The purpose of the Blog is to provide Castle & Cooke Mortgage, LLC’s opinions and general guidance on certain matters related to mortgages. The reader accepts full responsibility for use of the information contained herein.