A conventional loan by definition is simply any home loan that is not insured by a government agency. Loans backed by the government are often tailored to borrowers with less than average credit scores and borrowers who may have limited cash available for a down payment. Each of these agencies also set limits on the size of the loan that can be insured. Conventional loans can be a valuable option for borrowers with stronger credit and income or for those who are interested in more expensive homes that exceed the limits available for government-backed loans. Vince Gutierrez Mortgage offers the lowest rates on conventional loan options designed to meet the various needs of Spring residents.
Conventional loans are classified as either conforming or non-conforming loans. Conforming loans meet specific criteria that make them eligible for purchase by Fannie Mae or Freddie Mac. Non-conforming loans do not meet the requirements and cannot be sold to these entities. The first thing looked at when determining eligibility is the size of the loan. Loans amounts that exceed $424,100 are ineligible for purchase, although in certain high-cost areas, loans can reach as high as $636,150 and still meet eligibility. A popular non-conforming loan used by homeowners looking to purchase higher-priced homes is the jumbo loan. A jumbo loan is simply a conventional loan that exceeds the conforming loan limit for an area.
Historically, down payments of 20% or more have been required for Spring, Texas, conventional loans, however in recent years, they are becoming increasingly available with down payments as low as 3%. Private mortgage insurance (PMI) premiums will need to be paid when making smaller down payments. Those who can still make the traditional 20% down payment can avoid paying these premiums. If a borrower chooses to make a smaller down payment, they are still able to cancel their mortgage insurance once 20% equity is reached. This option is not available for government-backed loans such as FHA loans.
Conventional loans are available with a fixed-rate or adjustable-rate. Hybrid ARMs are also available which are a combination of a fixed-rate mortgage and an adjustable-rate mortgage (ARM). Each type of rate has unique benefits depending a borrower’s situation and goals.
Many homeowners prefer the peace of mind that a fixed-rate mortgage offers. No matter what happens in the real estate market, the rate on your fixed-rate mortgage will remain constant for the life of the mortgage. Fixed-rate mortgages are most commonly available as 15-year, 20-year, or 30-year loans.
The interest rate on your ARM will vary from time to time depending on market conditions. ARMs typically start out with a lower rate than fixed-rate mortgages. For those buyers who plan to relocate in the near future, an ARM may be a valuable option. Hybrid ARMs combine the components of fixed rate and adjustable rate mortgages. A 5/1 Hybrid ARM, for example, will begin with a 5-year fixed-rate period. Once the initial fixed-rate period ends, there will be yearly rate adjustments.
Vince Gutierrez Mortgage offers great rates and flexible terms on conventional loans throughout Spring and all of Texas. Whether you are purchasing your very first Spring home, or refinancing your existing mortgage, we can tailor a conventional loan to meet your exact needs. For more information on our conventional loan products, contact us today.