If you are planning to borrow $417,000 or less for a single-family home, you should be looking at a ‘conforming’ conventional loan if you aren’t getting an FHA or VA loan. Conventional conforming loans are not made by a government entity, like FHA and VA loans, but instead follow the terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These established guidelines generally call for a minimum credit score, certain income requirements, and a minimum down payment (generally between 3% and 20%).
Conventional home mortgage loans have either fixed or adjustable rates. A fixed-rate mortgage, means that your mortgage monthly payments remain fixed for the life of the loan and typically have a term of 15 or 30 years. A shorter-term loan usually results in a lower interest rate. While an adjustable-rate mortgage, or ARM, fluctuates in relation to the rate of a standard financial index therefore, monthly payments can go up or down accordingly.
Conventional loans are generally the easiest to qualify for as the guidelines are clear and concise. However, every conventional mortgage lender will review and verify a borrower’ credit, income and assets, along with an appraisal of the property.