Ah, the dream of home ownership. It’s as much the Texas Dream as it is the American Dream. And there are a lot of ways that Crystal Clear can help make it happen – the most popular option being the conventional home loan.
A conventional loan is one that isn’t backed by any government program, like the Department of Veteran’s Affairs, the Federal Housing Administration, or the US Department of Agriculture. Instead, it’s backed by private lenders.
This difference means that if the borrower defaults on the loan, it’s the private lenders who are at risk. For this reason, borrowers who make a down payment of less than 20% of the purchase price of the home must pay for private mortgage insurance – coverage that protects the lender in case of loan default.
But even though conventional loans are the most popular type of loan, there are still several kinds of conventional loans.
The Federal Housing Finance Agency sets maximum loan amounts for conforming conventional loans. This maximum can vary from county to county but is $484,350 through most of the country. Loans that meet Fannie Maw or Freddie Mac loan standards and do not exceed this ceiling are called conforming conventional loans.
Nonconforming Conventional Loans
Loans that exceed the conforming conventional loan maximum or that diverge from conforming loan underwriting standards are nonconforming conventional loans. One of the most common kinds of nonconforming loans are jumbo loans, which allow borrowers to purchase homes at higher price points.
Fixed-Rate Conventional Loans
Within the two above categories, home loans can feature a fixed rate for the entire loan term. With a fixed-rate conventional loan, the interest rate stays the same even when the overall interest rate market fluctuates.
Adjustable-Rate Conventional Loans
A borrower can sometimes find a lower rate by selecting an adjustable-rate conventional loan. With this kind of loan, rates fluctuate with the broader market, usually after an introductory period of locked-in rates.
Low-Down-Payment Conventional Loans
Even with a conventional loan, borrowers can make less than the traditional 20% down payment. Options depend on the lender, but borrowers may find conventional loans with the option to make a 3%, 5% or even as little as 0% down payment. With these options, the borrower will need to purchase private mortgage insurance.
The Crystal Clear Mortgage experts understand that with so many options, it can be difficult to know which kind of loan is right for you. That’s why we’re here! We’re glad to talk with you and guide you to the right home loan.