Requiring as little as 3% down, homebuyers appreciate the low rates and flexibility Conventional loans offer.
Features of a Conventional loan include:
- No Mortgage Insurance needed with a down payment of 20% or greater
- Adjustable Rate (ARM) or Fixed Rate options available
- Variety of property types allowed, including condos and manufactured homes
What is a conventional loan?
Conventional loans are the most popular home financing option. They provide a low interest rate option and contrary to what many believe, allow as little as 3% down. For buyers putting down 20% or more, Mortgage Insurance is not required. Qualifying criteria for Conventional loans is a little less forgiving than FHA loans (which allow a lower credit score and more recent adverse credit events like foreclosure). A major benefit with Conventional loans is the ability to purchase a condo, manufactured home, or investment property. These three purchase types require unique financing and Conventional loans fit the bill.
A Conventional loan is a private-sector loan that is not guaranteed or insured by the U.S. Government. While a Conventional loan isn’t originated as a government loan, it will likely be acquired by Fannie Mae or Freddie Mac. Fannie and Freddie are government sponsored corporations whose primary function is to provide stability to the mortgage industry through mortgage-backed securities. When Fannie or Freddie take on the risk associated with a mortgage, it allows lenders, like HomeStreet, to invest in more loans, making the dream of homeownership a reality for more people.
Since a Conventional loan is typically acquired by one of these agencies, it must meet what are referred to as “conforming” loan limits. Guidelines are determined annually and limits set on the size of home loan that Fannie and Freddie will purchase and guarantee. Loan limits vary by location to best coincide with the home values of a specific region. You can learn more about conforming loan limits in your area here.
One of our experienced loan officers can help you determine if a Conventional loan is the right type of financing for your particular needs and situation.
All loans subject to approval.
