What is a Conventional Loan?

A conventional mortgage is a loan that is not guaranteed or insured by any government agency. Conventional loans include fixed-term and fixed-rate mortgages, but not loans backed by the Federal Housing Administration or Department of Veterans Affairs.

Mortgages not guaranteed or insured by these agencies are known as conventional mortgages. These mortgages adhere to Fannie Mae guidelines. Fannie Mae, or Federal National Mortgage Association, is a corporation created by the federal government that buys and sells conventional mortgages. It sets the maximum loan amount and requirements for borrowers.

Usually, a conventional mortgage is a 30-year fixed rate loan. That means it has a fixed interest rate for the 30 year term of the mortgage. Conventional mortgages also typically require at least a 20 percent down payment or equity in the property.

Conventional mortgages can have better interest rates than non-conventional mortgages and can be a great option for those who have a 20 percent down payment or equity in the property.

However, even if the borrower does not have a 20 percent down payment or equity in the property, it is still possible to get a mortgage. By putting less down and accepting a slightly higher interest rate, the borrower can still get financing through a conventional mortgage and avoid the high cost of Private Mortgage Insurance (PMI) which is required on all loans above 80% Loan To Value (LTV), by taking advantage of our Lender Paid Mortgage Insurance program (LPMI) that will go all the way up to 95% LTV.

Ask us about this cost effective program.


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