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A conventional mortgage, or conventional loan, refers to any mortgage or home loan that is “not guaranteed or insured by the Federal Government”, and is commonly available in the market through Banks, Mortgage Companies, Savings and Loans, Credit Unions, etc,. Conventional mortgages are used in about 65% of all home mortgages nationally. Generally, conventional mortgages fall into two categories: “Conforming” which means the loan guidelines and loan amounts, conform to the standards established by Fannie Mae and/or Freddie Mac. “Non-Conforming” refers to loans that do not conform to these standards, most commonly due to the loan amount being higher than Fannie Mae limits such as with Jumbo Loans. Conventional loans can be fixed rate, adjustable rate, or a hybrid of both fixed and adjustable. The loan term, or length of the loan, is typically 15 years, 20 years, or 30 years. The 30-year “Fixed Rate” mortgage has historically been the most popular.
With this fixed rate loan the interest rate and payments are fixed over the 30-year life the loan. Each month the borrower makes the same principal and interest payment amount so that by the end of the loan term, the loan is paid off in full. The advantage of fixed rate loan is that the payments are set and do not change over time. Adjustable Rate Mortgages (ARM’s) are 30-year loans, but have interest rates and payments that adjust periodically. The interest rate is tied to a specific interest rate index, such as the 1-Year T-Bill or LIBOR. Most common is a 1-year ARM which has a low starting rate the first year, then the rate and payment adjusts annually based upon the movement of the underlying index. The advantage of an ARM is that the initial starting payments are often less than fixed rate loans thus making the loan initially more affordable.
A Hybrid ARM has an initial fixed rate period then rolls into a 1-year adjustable. For example, a 5/1 Hybrid is fixed for the first 5 years, and changes to a 1-year adjustable over the remaining 25 years. The advantage of Hybrid ARM’s is that the initial fixed period has rates and payments that is lower than a 30-year fixed rate, thus making the loan more affordable than a 30-year fixed but with less interest rate movement risk than a 1-year ARM.
Fixed Rate mortgages have interest rates that are fixed, and do not change over the life of the loan. Since the interest rate is fixed, the monthly principal and interest payment is the same each month, and the loan pays off in full by the end of the term. The most common loan terms (length of loan) are for 15, 20 or 30 years long.
A “Conventional” Fixed Rate mortgage means any commonly available fixed rate mortgage that is not issued or guaranteed by the federal government.
Adjustable Rate Mortgages (ARM’s) are 30-years loans that have interest rates and payments that change periodically (i.e. monthly, semi-annually or annually). Adjustable rate mortgages have low starting interest rates and payments, usually lower than current fixed rate loans, and then adjust based upon the movement of the underlying interest rate index. A “Conventional” Adjustable Rate mortgage means any commonly available adjustable rate mortgage that is not issued or guaranteed by the federal government.More Details
A Hybrid ARM is a loan that is fixed for an initial period of time, and then converts to an adjustable rate mortgage. One of the most common is a 5/1 Hybrid ARM which is fixed for the first 5 years and then converts to 1-year adjustable rate mortgage for the remaining 25 years. Also Available are 7/1 and 10/1 Hybrid ARM’s.More Details
Government guaranteed loan designed to provide consumers with financing to purchase (or refinance) a property in need of renovations and to simultaneously finance the cost of the improvements in the loan.Learn More
Similar to FHA 203K this loan allows borrowers to purchase, or refinance, a property in need of repairs or improvements, and to finance the cost of the renovations into the loan.Learn More
A revolving line of credit, secured by residential property, and used to access the existing equity in residential property. Borrowers are approved for a specific credit limit based upon their qualifications and amount of equity within the property.Learn More
A fixed loan amount and term, secured by residential property, that is used to access the existing equity in the property. Most commonly with a fixed interest rate and fixed monthly principal & interest payments.Learn More
A Personal loan is lumpsum fixed loan amount given to a qualified borrower that is not secured by residential property or collateral.Learn More