Conventional Loan

In the real estate loan market, a Conventional Loan refers to a mortgage loan that is not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). These loans are typically offered by private lenders and follow guidelines set by two government-sponsored enterprises (GSEs): Fannie Mae and Freddie Mac.

Different Types of Conventional Loans:

• Fixed-Rate Conventional Loan: This type of loan offers a fixed interest rate throughout the loan term, providing borrowers with predictable monthly payments.

• Adjustable-Rate Conventional Loan: With an adjustable-rate conventional loan, the interest rate is initially fixed for a specific period, usually 5, 7, or 10 years, and then adjusts annually based on market conditions.

• Jumbo Conventional Loan: Jumbo loans are conventional loans that exceed the loan limits set by Fannie Mae and Freddie Mac. They are designed for higher-priced properties and typically require a larger down payment and stricter qualification criteria.

Major Benefits of Conventional Loans:

• Flexibility: Conventional loans offer more flexibility in terms of loan amounts, property types, and borrower qualifications compared to government-backed loans.

• Competitive Interest Rates: Conventional loans often come with competitive interest rates, especially for borrowers with excellent credit scores.

• Private Mortgage Insurance (PMI) Options: Conventional loans provide various PMI options, including the ability to cancel PMI once the loan-to-value ratio reaches a certain threshold.

• Streamlined Refinancing: Conventional loans generally offer more streamlined refinancing options, allowing borrowers to take advantage of lower interest rates or change loan terms.

Conventional Loans Fit Well For: Conventional loans are well-suited for borrowers with good credit scores, stable income, and a sufficient down payment (typically 3% or more).

They are particularly beneficial for borrowers looking to finance properties that fall within the conforming loan limits set by Fannie Mae and Freddie Mac.

Big Players of Conventional Loans: The major players in the conventional loan market are Fannie Mae and Freddie Mac, two government-sponsored enterprises that provide liquidity and stability to the mortgage market by purchasing conventional loans from lenders. Additionally, other private investors, such as banks, credit unions, and mortgage companies, participate in funding conventional loans.

Pros and Cons of Conventional Loans: Pros:

• More flexibility in terms of loan options and property types

• Competitive interest rates

• Ability to cancel PMI

• Streamlined refinancing opportunities

Cons:

• Stricter qualification criteria compared to government-backed loans

• Higher down payment requirements for jumbo loans

• Limited availability for borrowers with lower credit scores or limited down payment funds

How Raksha Mortgage Team Can Help: The Raksha Mortgage Team is committed

to assisting and supporting buyers throughout the process of obtaining a conventional loan. They provide personalized guidance on loan options, help borrowers understand the pros and cons, and assist with the application and approval process. With their expertise and access to a wide network of lenders, the Raksha Mortgage Team ensures buyers receive competitive rates and suitable loan terms that align with their financial goals and circumstances.