Conventional Mortgages

Another loan option clients of King Financial have is a conventional mortgage!

Many feel conventional mortgages, which are not insured nor guaranteed by the government, are the most frequently used mortgage options within the industry.

These types of mortgages do not carry any guarantees for lenders to protect them from borrowers defaulting on their loans. As a result, lenders then increase their down-payment demands, with most expecting 20%. Lower debt-to-income ratios also are expected with conventional mortgages, plus they possess far stricter credit score and income requirements over other types of loans.

The rates for conventional mortgages can be fixed or adjustable, with the latter being able to remain consistent for a pre-determined length of time before its rate begins to fluctuate based on the market. Some banks do offer shorter and longer repayment options, yet 15-year and 30-year options are the most popular. 

Conventional loans do not possess any significant property or occupancy stipulations, though they are classified as either conforming or non-conforming. Meeting Fannie Mae/Freddie Mac underwriting guidelines qualifies a mortgage as “conforming”, and not meeting said underwriting guidelines makes a loan “non-conforming”.

The critical factor in determining whether a conventional mortgage is conforming or not is the total amount of the loan. As a general rule of thumb, loans less than $417,000 are considered conforming. A loan exceeding that total thus is non-conforming, and typically labeled a “jumbo mortgage”. In regards to jumbo mortgages, borrowers will then see an increase in their interest rates since there is greater risk.

As with many loans, conventional mortgages do possess loan limits. Within the areas of the U.S. where housing costs are above what is deemed “normal”, conforming loan limits are usually higher. 

Below is a chart detailing loan limits for conventional mortgages: 

 
Number of Units Max original principal balance Alaska, Guam, Hawaii, and U.S. Virgin Islands only
1 $417,000 $625,500
2 $533,850 $800,775
3 $645,300 $967,950
4 $801,950        $1,202,925        
                                
When using a conventional loan, a borrower often sees it help them reach their financial and housing goals. Interest rates are substantially lower, repayment conditions are more advantageous for the borrower and the processing of these loans take place at an accelerated pace. 

Immediate equity is given to borrowers, as well as a 20% down-payment waves the private mortgage requirement. A cancellation is allowed whenever the borrower achieves a loan-to-value ratio of 80%. Closing costs and other various fees are not only reduced, but they can also be included in the total amount of the loan. Also, there’s no penalty for paying off a conventional mortgage early if a borrower sells or refinances.

Conventional mortgages are certainly among the many loan programs King Financial can help those in the Flower Mound, Southlake and Colleyville areas with! To start the simple process of obtaining your Texas conventional mortgage, call (972) 539-2500 today.


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