A Conventional Mortgage is any home loan that is insured or guaranteed by Fannie Mae or Freddy Mac. These institutions provide a set of guidelines for credit, down payment as well as other qualifying criteria for these loans. That is why they are called a conventional or conforming loan. Conventional loans typically have the best interest rates and do require a higher standard of income and credit. To learn more about Conventional Mortgages contact us today. Apply now, or call our office where one of our friendly staff will help find the best program for you.
Most lenders would consider a conventional mortgage as a loan that conforms to the guidelines set forth by Freddie Mac and Fannie Mae. Conventional or conforming loans generally have the lowest interest rates on the market and are the most popular.
Technically speaking, a conventional loan is any mortgage that is not guaranteed or insured by the US government, such as VA, FHA and USDA.
The majority of people rely on a conventional mortgage when they have 20% down or 20% equity in there home which requires no mortgage insurance.
In the United States, a conforming loan is a mortgage loan that conforms to a pre set list of rules regarding income, credit and down payment among others.
In general, any loan which does not meet guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.
Starting in 1970, Fannie Mae was authorized by the United States Government to purchase residential mortgage loans. Fannie Mae worked with Freddie Mac to develop uniform mortgage documents and national standards for what would come to be known as a conforming loan.
The Office of Federal Housing Enterprise Oversight (OFHEO) set the criteria on what constitutes a conforming loan limit that Fannie Mae and Freddie Mac can buy. Criteria include debt-to-income ratio limits and documentation requirements.
It is important to understand that neither Freddie Mac nor Fannie Mae service the loans they purchase. Basically, even though these companies purchase loans from various lenders, it is the lender who retains the servicing - just a fancy way of saying "we collect your payments."
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