Conventional loans are mortgage loans that are not insured by the government (like FHA, VA and USDA loans), but they typically meet the lending guidelines that have been set by Fannie Mae or Freddie Mac. Conventional loans typically require a borrower to have good-to-excellent credit, reasonable amounts of monthly debt obligations, a down payment of 3-20% and reliable monthly income.
Fixed Rate Mortgages: Your rate and payment never change.
Adjustable Rate Mortgages: After the initial period your interest rate can change once a year.
For purchase transactions, conventional loans require the homebuyer to put down at least 5% - 20% of the purchase price of the home. If you are a first-time homebuyer, there is a 3% down payment option if you meet the qualifications. For a refinance transaction, most lenders require at least 10% equity in the property.
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1- to 4-unit family residences. A conventional loan can also be used to finance a primary residence, second home and investment property.
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