Conventional Home Loan

What is a Conventional loan?

A Conventional home loan can offer great rates and flexible qualifying guidelines. A Conventional loan is also known as a Conforming loan because it conforms to the standards set by Fannie Mae and Freddie Mac—which are two agencies that help standardize the mortgage industry. The maximum conforming loan limit for one-unit properties is $806,500 (or $1,209,750 in high-cost areas). If you need mortgage financing for more than that amount, you should look at Jumbo loan options.

What is an ARM loan?

An adjustable-rate mortgage (ARM) is a loan with an interest rate that changes based on market conditions after an initial fixed-rate period. ARMs are divided into two parts: the introductory fixed-rate period is followed by the adjustable-rate period, during which the interest rate adjusts at predetermined intervals.

The schedule of an ARM loan is generally given in a two-number format, often featured in the program name, like 7/6. The first number indicates the initial fixed rate period and the second number represents the frequency of adjustments after that point. For example, in a 7/6 ARM, the initial interest rate would remain fixed for seven years. Beginning in year eight, the lender would then adjust the rate every six months, depending on index fluctuations.  

How much is the down payment for a Conventional mortgage?

A Conventional loan can require as little as 3% down, making it a great option for those who do not want an FHA loan. While Conventional loans do require mortgage insurance if you are putting less than 20% down, you can cancel the mortgage insurance after your home equity reaches 20%. Even better, Conventional financing does not require up-front mortgage insurance like an FHA.