Conventional Mortgages
Definition of Conventional Mortgages:
A Conventional Mortgage conforms to conforms to and adheres by the guidelines of the Federal National Mortgage Association (FNMA) otherwise known as Fannie Mae, or the Federal Home Loan Mortgage Corporation (FHLMC) otherwise known as Freddie Mac. Both Fannie Mae and Freddie Mac are corporations that were created by the federal government, but are not ran by the federal government. Although FNMA and FHLMC are very similar they both have a set of standards of who can and can't qualify for a mortgage. One or the other can offer different interest rates depending on your credit, debt-to-income ratio and down payment.
Notes on Conventional Mortgages:
Since the loan is not insured by the government the home does not have to be up to FHA Property Standards, which is more restrictive.
Mortgage Insurance rates are typically better than FHA if your credit score is above 680.
The minimum credit score for a conventional loan is 620
Depending on your credit score, conventional mortgages may have better interest rates.
If you're a first time home buyer you can qualify for Fannie Mae Home Ready or a Freddie Mac Home Possible loan that allows for a 3% down payment and more competitive interest rates. *Pending Income Limits*
Down Payment Assistance programs are also available.
The debt-to-income maximum is 50% - in some cases it is 45%.
Certain Underwriting conditions must be met.
Here are the main conditions:
Income source and history
Assets for the down payment
Credit History
Non-Conforming (Jumbo) Mortgages:
There is a loan limit for Fannie Mae and Freddie Mac. In 2022 the Federal Housing Finance Agency set the loan limit in most U.S. Counties to $766,550. This means that a mortgage loan over $766,550 does not meet or conform to the FNMA and FHLMC guidelines. Instead there are specific investors and banks that will purchase Jumbo loans - these investors have their own guidelines that in some cases are more restrictive. They don't have as competitive interest rates and most of the time require a larger down payment. In some cases they are more lenient on guidelines - better mortgage insurance programs.
Have Questions?
Read our other blog posts or reach out to us directly.
Benson Ringle
Loan Officer NMLS #1516626
GA Lic. # 1516626
(218) 507-0429
Benson.Ringle@supremelending.com
