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Conventional Loans

Conventional loans refer to the loans supported by the Fannie Mae and Freddie Mac organizations.  These organizations are regulated by the federal government, yet they operate somewhat independently of the government.  The government does not lend money directly to borrowers.  Mortgage lenders and banks offer the loans using the guidelines and rules of the Fannie Mae and Freddie Mac associations.

The current maximum loan amounts allowed are as follows:

Fannie Mae      $417,000

Freddie Mac    $417,000

Conventional Purchase

A type of loan that requires a minimum down payment.  Any purchase loan that is 80% or more of the purchase price will require the borrower to pay monthly private mortgage insurance.  This insurance is designed to protect the lender in the event of a foreclosure.  The amount of the monthly private mortgage insurance (PMI) is determined by Fannie Mae or Freddie Mac guidelines.

Conventional Rate and Term Refinance

When a person has a current mortgage and would like to take advantage of the current market’s lower rates, this is accomplishing by refinancing the loan to a new interest rate and payment term.  The amount of the loan is usually just enough to pay off the existing mortgage.  It is possible to include the closing costs of the loan if there is sufficient equity of the home.

Conventional Cash-out Refinance

If a person owns a home that is worth significantly more than the current mortgage, they have positive equity.  Homeowners can borrow up to 80% of the appraised value of the home if they meet the loan requirements.  This money can normally used at the discretion of the borrower.

Fannie Mae DU Refi Plus

Fannie Mae DU Refi Plus is a temporary program offered through the President’s HAMP program http://www.makinghomeaffordable.com. If your property is owned by Fannie  Mae (you can check here) and you did not have mortgage insurance with your initial loan (80% or less LTV), you will not be required to carry mortgage insurance on the new loan. Another advantage is that you can refinance at today’s current low rates up to 125% loan to value (possible higher with implementation of HARP 2.0, contact us for details) with an unlimited CLTV so long as the second mortgage company is willing to subordinate.

Freddie Mac Open Access

Freddie Mac Open Access is a temporary program offered through the President’s HAMP program http://www.makinghomeaffordable.com. If your property is owned by Freddie Mac (you can check here) and you did not have mortgage insurance with your initial loan (80% or less LTV), you will not be required to carry mortgage insurance on the new loan. Another advantage is that you can refinance at today’s current low rates up to 125% loan to value (possible higher with implementation of HARP 2.0, contact us for details) with an unlimited CLTV so long as the second mortgage company is willing to subordinate.

Additional Resources
Conventional Loan Limits

 

 

 

Related Blog Posts:

  • Conventional Mortgage: Don’t Ignore These Items When Shopping for a Home
    Using a conventional loan to purchase a home offers the buyer quite a bit of flexibility. The appraisal does not have the restrictions offered by government loans. Also the loan amount will usually mean that the buyer has a wide range of homes to choose from. Because of that, it is important that buyers don’t overlook these items when house shopping.
  • Inspect the Closing Costs before Agreeing to the Mortgage
    With the housing crash that has been so prevalent over the past few years home prices have dropped and mortgage rates have followed suit. It would seem that the cost of completing a mortgage would also be lower. However, some lenders are looking for ways to make up for lost income and they are using the closing costs as an alternative.
  • Home Sales Have Increased and So Have Average Credit Scores
    The March 2011 report from the National Association of Realtors showed an increase of total home sales compared to the previous month. In addition, the average credit score for borrowers receiving conventional mortgage loans has risen to 760. People who qualified for an FHA loan also saw a rise in the average credit score.
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