Conventional Loans Have Great Rates and Flexible Terms
Conventional loans are a long-term staple in the mortgage industry. They are fully funded and insured through private lenders, unlike nonconventional loans which are insured by government entities. People across the United States choose conventional loans because they have competitive rates and adaptable terms to meet all types of need. If you’re looking for a home in Lake Forest, Anaheim, Santa Ana, or nearby California, the mortgage professionals at West Coast Realty Services can help you compare several different conventional loan possibilities. We work with top lenders across the country to offer the lowest rates possible. Contact us for a free quote or simply to learn more about conventional financing.
To understand conventional loans, you’ll first need to understand key differences they have with nonconventional loans. Nonconventional loans, like FHA, VHA and USDA loans, are backed through a federal government entity but funded by private lenders. Private lenders take on minimal risk when funding nonconventional financing, because the government ensures repayment in the case of default. Conventional loans are privately funded, as well, but they are not insured under the umbrella of the federal government. This means that most lenders are more selective about whom they approve for financing.
Conventional loans may be right for you if you have a good or better credit score, have a low debt-to-income ratio (typically 42% or lower), and have no recent derogatory marks on your credit score. You’ll also need to raise enough cash for a down payment. It’s good to aim for at least a 20% down payment, although there are some programs to defer payments.
While they may have more rigid approval requirements, they are very flexible when it comes to interest rates and terms. National lending partners like ours offer low interest rates, fixed and variable rates, and term lengths from one to 30 years.
Conforming or Nonconforming
Conventional loans are either conforming or nonconforming (also known as jumbo) based on limits set by mortgage giants and government-sponsored entities (GSEs) Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac aren’t official federal departments like the FHA, VA or USDA. Instead, they purchase mortgages from lenders and repackage them as mortgage-backed securities for sale on the public market. Both conforming and nonconforming mortgages are conventional loans. Fannie Mae and Freddie Mac only purchase mortgages up to a certain limit, depending on where you plan to purchase. In Orange County, for a one-unit home, that limit is $679,650.
Lenders must keep nonconforming loans on their own books, which means they are riskier than conforming loans. Jumbo loans may have higher interest rates than conforming loans, and they typically have variable interest rates, which can be very costly after the first few years of the loan. You should definitely expect to provide at least 20% down payment for a jumbo loan and prepare to document your income and ability to meet your payment obligations.
Find the Right Funding for Your Dream Home
If you’re looking for a home in Lake Forest, Anaheim, Santa Ana, or nearby California, trust West Coast Realty Services with your home financing. We’re backed by the power of national lenders, while providing the individualized attention you expect from a local business. To get started and get a free quote, contact us.