Conventional Mortgage Loans - Conforming and Non-Conforming

What is a Mortgage Brokerage?

A Conventional Mortgage is simply any mortgage loan that is not insured or guaranteed by the federal government. Conventional Mortgages typically require a higher down payment, usually 5%–20%. They also have higher income and credit score requirements than government loans. Conventional Mortgages can have a fixed interest rate or an adjustable interest rate. Typical fixed-rate loans have a term of 30 or 15 years. However, C2 Financial Corp. offers 30-year, 25-year, 20-year, 15-year, and 10-year fixed-rate options.

With an Adjustable-Rate Mortgage (ARM), the interest rate stays constant for a term and then fluctuates based on market conditions. C2 Financial Corp. offers a 10/1 ARM, 7/1 ARM, 5/1 ARM, and 3/1 ARM.

Conventional Mortgages are also categorized as conforming or non-conforming. If a loan meets the underwriting requirements set forth by the government-sponsored entities Fannie Mae and Freddie Mac, it is considered a conforming loan. If a loan does not meet all these requirements, it is considered a non-conforming loan. One of the main factors that determine whether a mortgage is conforming is the loan amount. Generally, a mortgage with a loan amount below $548,250 is considered conforming, whereas any loan amount above $548,250 is considered non-conforming, also known as a Jumbo Mortgage. Conforming limits may be higher in areas of the country with more expensive housing; for example, the conforming limit is $625,500 in Alaska and Hawaii. Jumbo Mortgages usually have a higher interest rate because they carry greater risk.

What are the benefits of a Conventional Mortgage?

Conventional Mortgages offer the following features:

Buyer has immediate equity in the property.
No private mortgage insurance is required with a 20% down payment, which is a great advantage.
Closing costs and fees may be included in the loan.
Repayment terms are generally more favorable.
Fewer bureaucratic hurdles, making the loans quicker to process.
No government stipulations and prepayment penalties if you sell or refinance your house.

Who may benefit from a Conventional Mortgage?

Conventional Mortgages are ideal for buyers with excellent credit who can afford a down payment.

Conforming Loan Limits by County

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Refinancing Your Mortgage

What does it mean to refinance your mortgage?

When you refinance your mortgage, you pay off your existing mortgage and replace it with a new mortgage that typically has a lower interest rate, term period, or monthly payment. If you have both a primary mortgage and a second mortgage, you could refinance both by paying them off and replacing them with one new mortgage. You may also refinance a non-FHA loan with an FHA loan. But refinancing has costs, so it isn’t always right for everyone. If you currently have an FHA-insured mortgage, you may be eligible for an FHA Streamline Refinance.

What are the benefits of refinancing?

Here are some of the benefits of refinancing:

Get a lower interest rate and make lower payments. A lower interest rate usually means you will make lower monthly mortgage payments. You may be able to get a lower rate because of changes in market conditions or because your credit score has improved.
Change the mortgage length.
- If you decrease the length of your mortgage—for example, if you go from a 30-year term to a 15-year term—you will usually have a higher monthly payment but a lower interest rate. You will likely pay off your mortgage sooner because you are paying more of the principal each month. The total amount of interest you pay throughout the shorter mortgage term will typically be less.
- If you increase the length of your mortgage, you will likely have a lower monthly payment, but the total amount of interest you pay throughout the longer term will typically be more. Note: Mortgage interest, unlike credit card debt, is tax-deductible; consult a tax professional for more information.
Build equity more quickly. With lower monthly payments, you may be able to make additional payments and build up equity in your home more quickly.
Get cash from the equity in your home. If you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment. You may use this cash for home improvements, which will increase the value of your home, or for other major expenses.
Convert from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage. Interest rates for an ARM can increase or decrease, so monthly mortgage payments can also rise or fall. Because the variable ARM rate is unpredictable, many people are more comfortable switching to a Fixed-Rate Mortgage that has a steady interest rate and steady monthly payment.
Get an ARM with better terms. You may be able to refinance your existing ARM by getting another one with terms that are more advantageous to you. For example, you may be able to get a new ARM with smaller interest rate adjustments or lower payment caps (the interest rate can’t exceed a certain amount), or the new ARM may start out at a lower interest rate.
Refinancing costs may be included in the loan.

Who may benefit from refinancing?

With interest rates at historic lows, now is a good time for every homeowner to consider and evaluate the option of refinancing. However, refinancing is typically a benefit only if you plan to stay in your home for a minimum of two to five years, in order to recover your refinancing costs.

For more information

Contact Lanny Clark today to see if refinancing may be right for you. We take pride in delivering value and savings to homeowners across the United States. It would be a pleasure to help.

Visit the Federal Reserve Board’s online publication, A Consumer’s Guide to Mortgage Refinancing
https://www.federalreserve.gov/pubs/refinancings/default.htm

conventional mortgage