Conventional Loans 101

Conventional Loans 101

Looking to buy a new home but don’t have enough cash saved up? Don’t worry. You may be able to get a conventional loan. Financial institutions like banks give this type of loan. You borrow a certain amount to purchase a house. Keep reading for more information about how conventional loans work. 

Conforming loans vs. non-conforming loans.

There are two types of home loans: conforming and non-conforming. Conforming loans follow the guidelines set by Fannie Mae and Freddie Mac, while non-conforming loans do not.

Conforming loans offer lower interest rates and a more comprehensive range of products, making them ideal for borrowers who want to keep their monthly payments as low as possible. Non-conforming loans typically have higher interest rates and are designed for borrowers who don’t fit within the guidelines of conforming loans.

So which one is right for you? It depends on your unique situation. If you’re looking for the best interest rate possible and meet the requirements of a conforming loan, that’s your best bet.

What is a non-qualified mortgage?

A non-qualified mortgage is a loan that does not meet the requirements of a qualified mortgage. A qualified mortgage is a mortgage that has certain features, such as a low down payment and no balloon payments. Non-qualified mortgages typically have higher interest rates and are aimed at borrowers who may not qualify for a qualified mortgage.

What is a portfolio loan?

A portfolio loan is a loan in which the lender groups together multiple loans and sells them as a single security to investors. Banks typically use this type of loan to reduce their risk since if one of the loans defaults, it won’t significantly impact the bank’s bottom line.

Investors like portfolio loans because they offer a diversified investment opportunity and typically have higher yields than other investment products. However, some added risk is associated with investing in portfolio loans since there is no guarantee that all underlying loans will remain current.

Fixed-rate vs. adjustable-rate mortgages. 

There’s a lot of debate about whether fixed-rate or adjustable-rate mortgages are better. Both have pros and cons; deciding which is right for you can be tricky.

With a fixed-rate mortgage, your interest rate is locked in for the duration of your loan. This can be helpful if interest rates rise when you’re paying off your mortgage – you won’t have to worry about your monthly payments increasing. However, if interest rates drop significantly during that time, you may pay more overall interest than you would with an adjustable-rate mortgage.

With an adjustable-rate mortgage, your interest rate will change over time based on the current market conditions. This can be beneficial if interest rates are low when you first take out your loan, as you may be able to lock in a lower rate. However, it can also be risky, as your payments could increase if interest rates rise during the life of your loan.

When choosing between a fixed-rate and an adjustable-rate mortgage, there’s no right or wrong answer. It all depends on your circumstances and what you’re comfortable with. If you’re unsure which option is best for you, speak with a financial advisor who can help you weigh your options.

All about low-down-payment & zero-down conventional loans.

A low-down-payment or zero-down conventional loan may be just what you need to buy your dream home. Here’s what you need to know.

A low-down-payment conventional loan is a mortgage that requires a small down payment (usually 3% – 5%). And, unlike with some government-insured loans, no mortgage insurance is required.

With a low-down-payment conventional loan, you can buy your dream home without saving up for a sizeable down payment. And, because there’s no mortgage insurance required, your monthly payments will be lower than they would be with a government-insured loan.

You’ll need good credit and a steady income to qualify for a low-down-payment or zero-down conventional loan. And, because these loans are not government-insured, they may come with slightly higher interest rates than other types of loans.

If you’re ready to buy your dream home but don’t have a large down payment saved up, a low-down payment or zero-down conventional loan may be the perfect solution. Talk to a lender today to see if you qualify.

Need Help? 

Now that you understand the basics of a conventional loan, you can start shopping for a lender that offers the best terms for your needs. Stone Tree Lending is an excellent option for low-interest rates and flexible repayment options. We specialize in helping our clients get the most out of their homebuying experience. Contact us today to learn more about how we can help you get financing for your dream home.

Leave A Reply