Conventional Loans

The term “conventional loans,” refers to mortgages that are offered by private lenders, as opposed to government-sponsored lenders. We can advise you as to whether any of these types of loans are in your best interest. Some examples are listed below.

Conforming conventional loans are backed by the Government-Sponsored Enterprises (GSEs) Freddie Mac (Federal Home Loan Mortgage Corporation) and Fannie Mae (Federal National Mortgage Association). However, non-conforming conventional loan borrowers do not meet the requirements set forth by the GSEs. Usually this occurs because the mortgage loan amount is so large it exceeds the regional GSE maximum of $424,100 (for most regions).  This is referred to as a "Jumbo Loan". These non-conforming conventional loans, or jumbo loans, are usually accompanied by higher interest rates than their conforming counterparts.

Fixed Rate Loans and Mortgages

A fixed rate loan or a fixed rate mortgage is one in which the interest rate does not fluctuate for at least some period of time. It may not be for the entire period of the loan, but for some time span the interest will stay the same. This type of loan makes it easy to predict what the payments will be and how long it will take to pay off the loan, which makes it beneficial for many borrowers. Variable rate loans, on the other hand, will fluctuate over time, which brings in added risk for the borrower as the interest rate could skyrocket.

Jumbo Mortgages

Jumbo loans are ones in which the borrower may or may not have good credit. In either case, they are allowed to take on more debt than normal limits would allow them to be exposed to. This brings in a lot more risk for the lender, in a number of ways. First of all, if the borrower defaults, the amount still owed is likely to be higher than on other loans.Secondly, since the property is likely to be a lot more expensive than average, there is going to be a smaller marketplace interested in buying it. That makes it tougher to sell the property to recoup the losses. A large down payment is usually required.