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Conventional Loans

Conventional Loan

A conventional mortgage loan is classified as a ``conforming`` loan, meeting the criteria set by either Fannie Mae or Freddie Mac, which are government-sponsored enterprises facilitating the purchase of mortgages from lenders. By purchasing these mortgages and selling them to investors, Fannie Mae and Freddie Mac enable lenders to free up funds and provide opportunities for more qualified buyers to secure homes.

If the down payment on a conventional loan is less than 20%, borrowers are typically required to pay for private mortgage insurance (PMI). PMI safeguards mortgage investors in the event of loan default. The cost of PMI varies based on factors such as the loan type, credit score, and the size of the down payment.

For first-time homebuyers, it is possible to obtain a conventional mortgage with a down payment as low as 3%. However, the minimum down payment requirement is generally 5%. To qualify for a conventional loan, a credit score of at least 620 is typically necessary.

Requirements

  • Conforming Loan Requirements.
  • Private Mortgage Insurance (PMI).
  • Flexible Down Payment Options.
  • A down payment of at least 3.5%
    .

Conventional Loan Benefits

01.
Conforming Loan Requirements

Conventional loans are considered “conforming” loans because they meet the guidelines set by Fannie Mae or Freddie Mac, government-sponsored enterprises. These entities purchase mortgages from lenders, allowing them to provide financing to more qualified buyers. Meeting conforming loan requirements ensures that borrowers can benefit from competitive interest rates and flexible terms.

02.
Private Mortgage Insurance (PMI)

When putting down less than 20% on a conventional loan, borrowers are typically required to pay for private mortgage insurance (PMI). PMI protects mortgage investors in case of loan default. The cost of PMI varies based on factors such as the loan type, credit score, and the size of the down payment. It’s important to factor in PMI costs when considering a conventional loan with a lower down payment.

03.
Flexible Down Payment Options

Conventional loans offer flexible down payment options. While a minimum down payment of 5% is generally required, first-time homebuyers may be eligible for conventional loans with a down payment as low as 3%. Having the ability to choose a down payment that aligns with your financial situation allows for greater flexibility in achieving homeownership.

01.
Conforming Loan Requirements
02.
Private Mortgage Insurance (PMI)
03.
Flexible Down Payment Options

Learn about Conventional loans

Understanding the conforming loan requirements, the impact of PMI on lower down payments, and the flexibility of down payment options are key aspects to consider when exploring conventional loans. It's advisable to consult with a mortgage professional to assess your eligibility and determine the most suitable conventional loan options based on your specific financial circumstances and homeownership goals.

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