Are you looking for a way to finance a part of the American dream? Then reading the following information regarding a conventional home loan may be a great place to start!
A conventional home loan is also known as a conforming home loan, as it strictly conforms to the guidelines set forth by both Fannie Mae (FNMA) and Freddie Mac (FHLMC). Lenders assume all risk that borrowers will pay back their loan plus interest. In the event a homeowner defaults on their conventional loan, lenders are not insured or guaranteed reimbursement by the federal government.
Fannie Mae and Freddie Mac are stockholder-owned corporations that are able to provide Americans with a continuous flow of affordable funds that can be used to finance the home of their dreams. Affordable borrowing is achieved when Fannie Mae and Freddie Mac as corporations conduct business by reducing lender risk:
This type of home purchase or refinance loan can have either a fixed or adjustable interest rate.
The maximum limits for a conventional home loan depends on several variables including the county and state in which the home you intend on financing is located.
The national conventional, or conforming, loan limit for single-family properties increased from $33,000 in the early 1970s to $417,000 between 2006 and 2008, and then up again in 2017 to $424,100.
These limits are 50 percent higher ($636,150) in the following four areas, due to the fact that homes cost more in these areas:
In 2008, a series of legislative acts temporarily increased the loan limits for single-family properties in certain high-cost areas of the United States up to $729,750. Today, the highest loan limit is $721,050 (Honolulu, HI).
Permanent conventional loan limits, which apply to acquisitions of certain mortgages that originated prior to July 1, 2007, adhere to the Housing and Economic Recovery Act of 2008 (HERA) terms.
To qualify for a conventional home loan for the purchase of a new home, or to reduce your existing home’s interest rate, your income and credit must meet certain qualifications. These qualifications will be discussed at the time of your pre-eligibility interview.
The down payment for a conventional home loan is relatively low—as little as 5% with the purchase of Private Mortgage Insurance (PMI). You should note that additional fees may apply.
If you would like to see if you are eligible for a conventional home loan, or are just interested in learning more about the various loan options we at Forthright Funding offer, please feel free to contact one of our mortgage loan specialists at (855) 351-9522.
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