Conventional Loans: Versatile Home Financing
A Caleb Parmenter – Big Valley Mortgage, we work with top lenders across the United States to provide our clients with a wealth of options when it comes to home financing. Conventional loans are a popular mortgage solution for clients in good financial standing who want competitive rates and flexible terms. These privately funded, privately insured home loans have stricter approval requirements, but they can help clients save over time when compared with nonconventional loans. Caleb Parmenter – Big Valley Mortgage can educate you further on the different types of conventional loans so you can begin the journey to homeownership with confidence. We help clients in Fresno, Clovis, Madera, and Visalia, CA. If you’re looking for guidance, a free quote, or are ready to start looking for the home of your dreams, contact us for a consultation.
Conventional Loan Basics
There are two main divisions when it comes to mortgages: conventional and nonconventional. Nonconventional loans are insured through various departments within the federal government. They were developed to help certain people find financing – people who otherwise might be found ineligible for conventional financing. Nonconventional loans are backed through departments like the Federal Housing Administration, U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture. Because these departments reimburse private lenders when a borrower defaults on a conventional loan, lenders open their doors to accept a broader spectrum of clients, some of whom may not have great credit or the ability to make a large down payment.
Conventional Loan Benefits
While nonconventional loans have less stringent approval requirements, conventional loans provide some unique benefits.
- They typically have lower interest rates, which translates into long-term savings.
- They are not subject to income limits set by the federal government.
- They have no universal lending limit, like some government-sponsored loans do.
- They do not require private mortgage insurance with a down payment of 20% or more. Some nonconventional loans, conversely, require borrowers pay mortgage insurance for at least 5 years.
Conforming and Nonconforming Loans
There is a further division among types of conventional loans. Mortgage giants Fannie Mae and Freddie Mac are government-sponsored entities (as opposed to divisions of the government) that buy mortgages from lenders and repackage them into mortgage-back securities. They will not purchase mortgages that exceed county-specific limits. Loans that do not exceed these limits are conforming conventional loans, while mortgages that exceed it are nonconforming conventional loans.
What does this mean for you? If you want to purchase a home that exceeds the conforming limits in your county, you’ll need a nonconforming loan, aka jumbo loan. Jumbo loans are still conventional loans, but they typically have higher interest rates, require a larger down payment, and typically have shorter terms. In Fresno, Madera, and Tulare Counties, these are the conforming loan limits:
- $453,100 for a one-unit home
- $580,150 for a two-unit home
- $701,250 for a three-unit home
- $871,450 for a four-unit home
If you plan to purchase a home that exceeds these limits, talk to us about a jumbo loan.
You’ve got a Friend in Home Financing
Choosing the right mortgage can feel like a big task when you’re not well versed in home finance. One of our greatest joys as mortgage professionals is to help clients cut through the confusion about home financing to find a lending solution that really meets their needs. Contact Caleb Parmenter – Big Valley Mortgage to learn more about conventional loans. We offer free quotes and have great connections in the community with real estate agents and Realtors. If you’re thinking of purchasing a home in Fresno, Clovis, Madera, or Visalia, start with us.