What Is A Conventional Loan?
A conventional loan by definition is simply a mortgage that is not guaranteed by any government agency including the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA). This includes loans from banks, credit unions, or mortgage companies. Mortgage loans guaranteed by government agencies are often geared toward borrowers with lower income and credit scores. On the other hand, conventional loans have become a popular choice amongst borrowers with stronger credit and generally higher income. Davis Mortgage Ltd. offers a variety of conventional loan options throughout Corrales, Rio Rancho, Albuquerque, and the surrounding Albuquerque Metro communities as well as Arizona.
No single loan is ideal for every borrower which is why there are so many conventional loan options available. Let’s take a look at some of these options available for conventional mortgages.
30 Year Fixed Rate
With a fixed rate mortgage, the interest rate does not change for the term of the loan, so the monthly payment is always the same. Typically, the shorter the loan period, the more attractive the interest rate will be.
Payments on fixed-rate fully amortizing loans are calculated so that the loan is paid in full at the end of the term. In the early amortization period of the mortgage, a large percentage of the monthly payment pays the interest on the loan. As the mortgage is paid down, more of the monthly payment is applied toward the principal.
A 30 year fixed rate mortgage is the most popular type of loan when borrowers are able to lock into a low rate.
Benefits:
- Lower monthly payments than a 15 year fixed rate mortgage
- Interest rate does not go up if interest rates go up
- Payment does not go up, it stays the same for 30 years
Drawbacks:
- Higher interest rate than a 15 year fixed rate mortgage
- Interest rate stays the same even if interest rates go down
15 Year Fixed Rate
A 15 year fixed rate mortgage allows you to pay off your loan quicker and lock into an attractive lower interest rate.
Benefits:
- Lower interest rate
- Build equity faster
- If interest rates go up, yours is fixed
Drawbacks:
- Higher monthly payment stays the same if interest rates go down
- Interest rate stays the same even if interest rates go down
Jumbo Loans
A Jumbo Loan is a mortgage option for loan amounts over the federally mandated conventional limit. Currently, the Jumbo loan limit is $417,000. However, Congress has recently approved changes that may get you a lower rate on some jumbo loans.
Jumbo loans are much more flexible than most people think. Here is a how a Jumbo loan can help you afford your home in that high cost area:
For a Jumbo Loan you don’t always need a down payment of 20 %. Based on your home, the market, and your finances, you can refinance your jumbo loan with less than 80% equity. Or, buy a home in a competitive market with as little as 10% down.
Did you know that FHA loans are available as a jumbo? Get up to 97% financing on your home with the new, higher FHA loan limits!
Jumbo loans can either be fixed-rate or have a mortgage rate that adjusts after a fixed period. An adjustable-rate mortgage can get you a smaller monthly payment. A fixed-rate mortgage can give you secure, fixed payments year after year.
Charles Davis
NMLS: 299652
What Is A Conventional Loan?
A conventional loan by definition is simply a mortgage that is not guaranteed by any government agency including the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA). This includes loans from banks, credit unions, or mortgage companies. Mortgage loans guaranteed by government agencies are often geared toward borrowers with lower income and credit scores. On the other hand, conventional loans have become a popular choice amongst borrowers with stronger credit and generally higher income. Davis Mortgage Ltd. offers a variety of conventional loan options throughout Corrales, Rio Rancho, Albuquerque, and the surrounding Albuquerque Metro communities and Arizona.
No single loan is ideal for every borrower which is why there are so many conventional loan options available. Let’s take a look at some of these options available for conventional mortgages.
30 Year Fixed Rate
With a fixed rate mortgage, the interest rate does not change for the term of the loan, so the monthly payment is always the same. Typically, the shorter the loan period, the more attractive the interest rate will be.
Payments on fixed-rate fully amortizing loans are calculated so that the loan is paid in full at the end of the term. In the early amortization period of the mortgage, a large percentage of the monthly payment pays the interest on the loan. As the mortgage is paid down, more of the monthly payment is applied toward the principal.
A 30 year fixed rate mortgage is the most popular type of loan when borrowers are able to lock into a low rate.
Benefits:
- Lower monthly payments than a 15 year fixed rate mortgage
- Interest rate does not go up if interest rates go up
- Payment does not go up, it stays the same for 30 years
Drawbacks:
- Higher interest rate than a 15 year fixed rate mortgage
- Interest rate stays the same even if interest rates go down
15 Year Fixed Rate
A 15 year fixed rate mortgage allows you to pay off your loan quicker and lock into an attractive lower interest rate.
Benefits:
- Lower interest rate
- Build equity faster
- If interest rates go up, yours is fixed
Drawbacks:
- Higher monthly payment stays the same if interest rates go down
- Interest rate stays the same even if interest rates go down
Jumbo Loans
A Jumbo Loan is a mortgage option for loan amounts over the federally mandated conventional limit. Currently, the Jumbo loan limit is $417,000. However, Congress has recently approved changes that may get you a lower rate on some jumbo loans.
Jumbo loans are much more flexible than most people think. Here is a how a Jumbo loan can help you afford your home in that high cost area:
For a Jumbo Loan you don’t always need a down payment of 20 %. Based on your home, the market, and your finances, you can refinance your jumbo loan with less than 80% equity. Or, buy a home in a competitive market with as little as 10% down.
Did you know that FHA loans are available as a jumbo? Get up to 97% financing on your home with the new, higher FHA loan limits!
Jumbo loans can either be fixed-rate or have a mortgage rate that adjusts after a fixed period. An adjustable-rate mortgage can get you a smaller monthly payment. A fixed-rate mortgage can give you secure, fixed payments year after year.
Charles Davis
NMLS: 299652