Many home loans today including FHA loans, VA loans, and USDA loans are backed by the government. Loans backed by government agencies are generally designed for borrowers with below average credit scores or limited down payment availability. Conventional loans on the other hand, are any home loans not backed by a government agency. These loans are often a valuable option for those with stronger credit and income or for borrowers interested in a home loan that exceed the limits placed on government-insured options. Fairway Independent Mortgage Company offers great rates and terms on conventional loan options to homebuyers throughout Walnut Creek, Concord, Lafayette, and Danville.
Conventional mortgages can be considered either conforming or non-conforming. A conforming loan meets certain criteria set in place by Fannie Mae and Freddie Mac and is eligible for purchase by either of these two entities. Non-conforming loans on the other hand are mortgages do not meet the requirements to be eligible for purchase. The loan amount is generally the first thing that is looked at when determining eligibility. Loans greater than $424,100 are not eligible for purchase. In certain high-cost areas, loans can reach as high as $636,150 while still being considered conforming.
Historically, conventional loans in California required down payments of 20% or more. Conventional loans are often available today with down payments as low as 3%. It is important to note that a 20% down payment allows buyers to avoid private mortgage insurance (PMI). If a buyer opts for a low down payment loan, they may still need to pay PMI, however, they may choose to cancel it once 20% equity is reached. Mortgage insurance may never be cancelled on government-backed loans such as FHA loans.
Conventional loans are available with fixed-rate, adjustable-rate, and hybrid rate options. Many homeowners prefer fixed-rate mortgages as they offer long-term stability and peace of mind. Your monthly payment with a fixed-rate mortgage will never change throughout the life of the mortgage regardless of market changes. Fixed-rate mortgages are generally available as 15-year, 20-year, or 30-year loans.
If you choose to go with an adjustable-rate mortgage (ARM), the interest rate on your mortgage will vary from time to time based on the market. ARMs typically start out with lower rates than fixed-rate mortgages. Buyers with plans to relocate or refinance in the near future may find that an ARM is their best option.
Fairway Independent Mortgage Company offers great rates and flexible terms on conventional loans throughout Walnut Creek, Concord, Lafayette, and Danville. Whether you are purchasing your very first California 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.