Conventional Home Loans

Gold Star Mortgage can certainly help you obtain a conventional home loan for a property in California!

Conventional home loans are not guaranteed or insured by the government, and they also are perceived by many as the most common mortgage option in the real estate industry.
Should a borrower default on their mortgage, conventional home loans do not carry guarantees for lenders. Therefore, lenders increase their down-payment demands – typically to 20% of the price of the home. Another component of  conventional home loans are their debt-to-income ratios, which are lower than other loan programs and possess far stringent credit-score and income requirements.

Conventional home loans can feature mortgages with adjustable or fixed rates. Adjustable-rate mortgages remain consistent for a specified duration of time before starting to fluctuate based on the current market. Standard terms are either 15 or 30 years, however, some banks are capable of presenting shorter and longer repayment options.

Regarding significant property and occupancy restraints, conventional home loans do not feature any. Yet these loans can be labeled as “conforming” or “non-conforming”. Meeting underwriting guidelines imposed by Fannie Mae and Freddie Mac qualifies a conventional mortgage as conforming. Non-conforming conventional home loans simply do not adhere to the standards enforced by both government entities.

Impacting the classification of a conventional home loan the most is its loan amount. Typically, loans with a total of less than $417,000 are classified as conforming, and loans more than $417,000 are classified as non-conforming. Loans considered non-conforming are also referred to commonly as “jumbo mortgages”.

An increase in interest rates will be imposed on borrowers using jumbo mortgages because of the higher risk of the loan. Loan limits do apply to conventional home mortgages, and these limits are based on the location of a home.

Limits for conforming loans are naturally greater in the locations of the U.S. where housing costs are higher than the average. In a high-cost area, $625,000 is the limit.
Included below are the loan limits for conforming mortgages:

Number of Units Max original principal balance Alaska, Guam, Hawaii, and U.S.
Virgin Islands only
1 $417,000 $625,500
2 $533,850 $800,775
3 $645,300 $967,950
4 $801,950 $1,202,925

When taking advantage of the conventional home mortgage option, many borrowers succeed in reaching their financial goals. Interest rates are substantially lower, repayment conditions are more advantageous and loans are processed faster.

Immediate equity is also typically granted to borrowers through this loan program. A 20% down payment dismisses a private mortgage requirement, as borrowers are allowed to cancel when their existing mortgage insurance achieves a loan-to-value ratio of 80%. Also, closing costs and fees are less with conventional home loans, with a possibility of their inclusion in the loan’s amount. Additionally, a borrower cannot be penalized for paying off their loan in full early by refinancing or selling their home.

Gold Star Mortgage is ready to help you with all of your conventional home mortgage needs! Call us today at (925) 930-7870.