What's a Conventional Mortgage?
A conventional mortgage refers to any loan that is not insured or guaranteed by the federal government, as opposed to government-insured loans including Federal Housing Administration (FHA), U.S. Department of Veteran Affairs (VA) and U.S. Department of Agriculture (USDA). These mortgages usually provide more term options and have fewer restrictions with respect to the guidelines.
A conventional program usually requires good credit and established income and therefore offer the following benefits
- Low Down Payment options, as little as 3% down
- Lower interest rates for borrowers with good credit
- Flexible mortgage insurance options
- Flexible loan terms and program options
Conventional Loan Programs
Fixed-rate mortgages have interest rates that remain the same for the entire term of the loan, which could be 10, 15, 20, 25 or 30 years. The fixed rate is a great option which protects the borrower against market fluctuations and possible rate increases. The lower term options have higher monthly payments but offer lower interest rates and allow the borrower to build equity at a faster pace.
A jumbo loan, or non-conforming mortgage, allows you to purchase more expensive homes with a loan amount above the conforming limit set by the Federal Housing Finance Agency. As of January 1st 2018, the conventional conforming loan limit was increased to $453,100; however, the limit is $679,650 in higher cost areas such as Los Angeles County.