Whether you are recently married and buying your first home, or nearing the end of your career and purchasing a retirement property, National Home Finance can help.
Loans come in as many varieties as homeowners do. There are a lot of things to consider in order to know just which of these will fit you and your family.
Do you need a jumbo loan or will a conforming loan work? Jumbo loans are larger than the guidelines of Fannie Mae and Freddie Mac. They are seen as riskier, so they require the buyer give a larger initial payment. Most loans conform, though, and will not be classified as jumbo.
Do you want a fixed rate or an adjustable rate? Fixed rate loans have the advantage of a predictable interest rate and monthly mortgage payment. Adjustable loans have the benefit of a low initial interest rate but will be raised annually after a period of time. Many factors play into which is right for whom.
Do you qualify for a government-backed loan or do you need to stay with a conventional loan? Conventional loans are the usual home loans that are provided in most home sales. Some people are qualified to buy their homes through government programs, though. If you are able to, these programs could save you significant money.
Unless you have years of experience, it is hard to know immediately which options are best in which cases. Don’t act alone. National Home Finance provides all of these loan varieties and has veteran brokers that know just how to tailor your mortgage to your particular needs.
What is a Conventional Loan?
Historically, a conventional loan refers to a mortgage that is “non-governmental guaranteed or insured.” An FHA loan, for example, is a loan that is insured by the government and a VA loan is backed or “guaranteed” by the government. A conventional loan is offered by a bank, lender or broker, and the government does not insure it.
Conventional loans can be fixed rate, adjustable, reverse, or refinance mortgages, depending upon the buyer’s situation or needs. The conforming loan limit for a conventional loan is currently $417,000 (USD). Above $417,000 is considered a “jumbo” loan.
How do I get a Conventional Loan?
For most conventional loans, you will need a down payment of at least 5% of the loan amount. If the loan-to-value (LTV) ratio is above 80% (if you pay less than 20% down), you will usually be required to purchase Private Mortgage Insurance (PMI).
Loan terms can go different lengths: 15, 30, or even 40 years. The longer the loan term, the lower your monthly payment will be, which is why most people prefer longer terms. However, with longer terms, you will pay more in interest over the life of the loan.
A newer product is the Conventional 97% LTV mortgage. This conventional mortgage is backed by Fannie Mae and requires only 3% down payment, which may come in the form of a gift from family or friends.