A conventional loan by definition is a loan not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA) or the U.S. Department of Veterans Affairs (VA). This includes essentially any other type of loan from banks, credit unions, and mortgage companies. Mortgage loans guaranteed by government agencies are typically designed for the borrower with lower credit and income while on the other hand, conventional loans have become a preferred loan for borrowers with stronger credit and income. West Ridge Financial offers local Utah borrowers a variety of conventional loan products with excellent rates and down payment options.
They are many conventional loan options available given the wide range of borrower needs. Below are some of the more common options available for traditional conventional loans:
Fixed-rate and Adjustable-Rate Mortgages
Fixed-Rate Mortgage – Fixed-rate mortgages have the same interest rate for the duration of the mortgage, even if there are variations in the market rate. This type of loan offers security knowing your monthly payment will always be the same. Fixed-rate mortgages are generally available as 15 year, 20 year, and 30 year terms.
Adjustable-Rate Mortgage (ARMs) – Adjustable-rate mortgages have an interest rate that will occasionally vary. ARMs can start with a fixed-rate period which are considered Hybrid ARMs. For example a 5/1 Hybrid ARM would begin with a 5 year fixed rate followed by an adjustable rate each year thereafter. ARMs typically start at a lower rate than fixed-rate mortgages meaning you will pay less at the beginning of the mortgage.
Conforming and Non-Conforming Mortgages
Conforming – A conforming loan must adhere to certain criteria established by Fannie Mae and Freddie Mac. The size of the loan is the primary factor. Currently, the largest loan Fannie Mae or Freddie Mac will purchase in most locations is $417,000. In what are designated as high-cost counties, this can reach $625,500. Conforming loans must also follow certain debt-to-income (DTI) and documentation guidelines. Conforming limits in Utah:
Non-conforming – A non-conforming loan on the other hand is one that does not meet the previously mentioned requirements set forth by Fannie Mae and Freddie Mac. As they are not eligible to be purchased by these two organizations, they can carry higher rates, larger down payment requirements, and mortgage insurance premiums.
Jumbo Loans – A common non-conforming loan is the Jumbo Loan. Jumbo loans exceed the amount eligible to be a conforming loan. For borrowers looking for higher-priced or luxury homes, Jumbo loans are a great option.
West Ridge Financial offers a number of conventional loan options throughout Roosevelt, Vernal, and Alpine. We are able to offer excellent financing options for all borrowers. To see what conventional loan option is best for you, contact us today or apply online!