When it comes to numerous mortgage
options, the conventional loans are always on the top priorities. This is
basically the mortgage made by private lenders that satisfy the underwriting
requirements of Fannie Mae or Freddie Mac, two of the largest acquirers of
mortgages on the secondary market. Well, there are few significant factors to
know about this type. For your ease, here we are describing one by one:
- Approximately 70% of all home loans made in the United States are conventional. Fannie and Freddie are government-sponsored entities (GSEs), not agencies that are regulated but not operated by the U.S. Government.
- There are two crucial characteristics of conventional mortgage products. The word “conventional” refers to a loan not insured by a government agency.
- The size of conventional loans cannot exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA). Given the close association of the two features, you’ll often hear the two words “conventional” and “conforming” in the same breath.
- There are numerous benefits you can get with the conventional loans such as:
- No upfront mortgage insurance
- Standard options of fixed terms are available: 10 year, 15 year, 20 year, 25 year and 30 year
- Down payment can be as low as 5%-15% with PMI
- No private mortgage insurance premium is required with a 20% down payment
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