Conventional Loans
- Conventional Loans:
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Conventional loans are mortgage loans offered by private and publicly traded banks and insured by Fannie Mae and Freddie Mac. These mortgages are generally issued to people with:
- Credit scores above 680.
- Having a least 5% for a down payment or at least 10% equity in subject property.
- At least 5% of the down payment needs to be verified as borrower's funds.
- Assets in reserve.
- Stable employment.
- Mortgages under $417,000.
With conventional loans, its important to understand that if you do not have at least 20% as a down payment or 20% equity, you will need to pay mortgage insurance each month. You will have mortgage insurance until you have enough equity in the property. This can be achieved by either paying down your principle balance to 78% of the original appraised value, or having a new appraisal and proving that you have at least 20% equity. Your mortgage insurance amount is determined with a number of risk factors: credit score, loan-to-value, transaction type, and also current market conditions.
Another consideration with conventional loans is that the appraisal is a little more accepting of condition. There is still a minimum standard that is set forth when appraising a property.
Fannie Mae and Freddic Mac created a program that allows people with existing Fannie Mac and Freddie Mac loans to refinance into lower rates, regardless of current appraised value versus current loan amount. There are some inportant guidelines that one must adhere to in order to qualify for these programs.
