Many of today’s popular home loans such as FHA loans and VA loans are backed by government agencies. Government-backed loans are often tailored to buyers who do not have perfect credit or who have limited down payment availability. They are also restricted to certain loan amounts depending on the program. Conventional loans are any home loans that are not backed by a government agency. Buyers with stronger credit and income or buyers who are searching for home loans that exceed the limits placed on government loans will find conventional loans to be a valuable option. At Mortgage Team 1, Inc, we offer great rates and terms on a variety of Mobile conventional loans.
Conventional loans are classified as either conforming or non-conforming loans. Conforming loans are home loans that meet certain criteria and are therefore eligible for purchase by Fannie Mae and Freddie Mac. Non-conforming loans do not meet these criteria making them ineligible. Typically, the loan amount is the first thing looked at when determining edibility. Conforming loans cannot exceed $424,100 although this amount can be as high as $636,150 in specially designated high-cost areas. The most common non-conforming loan is the jumbo loan. A jumbo loan is simply a conventional loan that exceeds the conforming loan limit for an area.
Historically, a 20% down payment was required for conventional loans although options with lower down payment requirements are becoming increasingly available. One advantage of making the traditional 20% down payment is that it allows the borrower to avoid private mortgage insurance (PMI). Even if they don’t have a 20% down payment available, PMI may be cancelled once 20% equity is reached. Government-backed loans such as FHA loans do not allow insurance to be cancelled at any time.
Conventional loans are offered as either fixed-rate mortgages, adjustable-rate mortgages (ARM), or Hybrid ARMs. Borrowers will find there are benefits to both types of rate depending on their needs and financial goals.
Regardless of what may happen in the market, the rate on a fixed-rate mortgage will remain constant for the life of the mortgage. Borrowers often prefer fixed-rate mortgages because of the stability that they offer. Fixed-rate mortgages are generally available as 15-year, 20-year, or 30-year loans.
As the name suggests, the rate on an adjustable-rate mortgage will fluctuate from time to time based on market conditions. ARMs often start at a lower rate than comparable fixed-rate mortgages making them a valuable option for someone who may be planning to relocate in the near future. Hybrid ARMs are a combination of fixed-rate and adjustable-rate mortgages. A 5/1 Hybrid ARM for example, begins with a 5-year fixed period followed by yearly rate adjustments.
Mortgage Team 1, Inc offers a variety of conventional loans options with great rates throughout Mobile and all of Alabama. Whether you are purchasing your first Mobile home or are interested in refinancing your current mortgage, we can provide a conventional loan option to meet your needs. For more information on our conventional loan offerings, contact us today. We are available even after hours!