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Getting a mortgage can be confusing. There are lots of terms you may not be familiar with and, of course, major decisions to be made. Basically, loans fall into two main categories: Government and Conventional. Government loans include FHA Loans (Federal Housing Administration), VA Loans (Department of Veterans Affairs) and USDA Rural Development (United States Department of Agriculture). All other mortgages are considered Conventional. When you go with conventional financing, the terms and conditions of your mortgage must meet the funding criteria of Fannie Mae and Freddie Mac, two government-sponsored enterprises established to secure mortgages in the form of mortgage-backed securities. Depending on market conditions, one source estimates that about 35-50% of mortgages are conventional. These mortgages may be fixed-rate or adjustable-rate mortgages.
There are several benefits to having a Conventional Mortgage. Because individual lenders - not the federal government - set the fees and rates, conventional financing can often have either lower fees or lower rates. Additionally, the lender may allow borrowers to offer collateral other than the property mortgaged. This is a particular benefit to borrowers with limited access to credit. For some, though, conventional financing may not be feasible. Conventional loans generally require larger down payments than government-backed loans, making it difficult for many borrowers who do not have enough money saved to spend out-of-pocket. Due to the interest rates being set by individual lenders, they can exceed those of FHA and VA loans, both of which are government-backed.
However, for the most part, rates for conventional loans and for FHA loans do not vary significantly, as they are both competing in the same market.
Additionally, if the loan has a LTV (loan-to-value) greater than 80 percent, a borrower is required to purchase PMI (Private Mortgage Insurance), which can be paid monthly. This is not insurance for you - the home buyer, it is insurance for the lender in case the loan defaults. Please note that once your LTV drops below 80 percent, you may be able to drop your PMI. . Another option available to you at that point is to apply for a loan without having to purchase PMI, making conventional financing attainable and more affordable. USDA loans and VA are both government loans, but they have an additional benefit, no Mortgage Insurance! USDA Guaranteed Loans are charged an annual guarantee fee instead of mortgage insurance, the fee continues for the life of the loan!
There are additional programs available not mentioned here in this section. Please see additional information provided on the individual pages of our site. We are constantly adding new programs here for you to assist in growing your knowledge base as you continue in your journey!
If you are interested in reverse mortgages, renovation loans, ground-up construction loans, each with the option of 30-year fixed rate mortgages, please feel free to contact one of our professionals today, we are here to assist!
Getting a mortgage can be confusing. There are lots of terms you may not be familiar with and, of course, major decisions to be made. Basically, loans fall into two main categories: Government and Conventional. Government loans include FHA Loans (Federal Housing Administration), VA Loans (Department of Veterans Affairs) and USDA Rural Development (United States Department of Agriculture). All other mortgages are considered Conventional. When you go with conventional financing, the terms and conditions of your mortgage must meet the funding criteria of Fannie Mae and Freddie Mac, two government-sponsored enterprises established to secure mortgages in the form of mortgage-backed securities. Depending on market conditions, one source estimates that about 35-50% of mortgages are conventional. These mortgages may be fixed-rate or adjustable-rate mortgages.
There are several benefits to having a Conventional Mortgage. Because individual lenders - not the federal government - set the fees and rates, conventional financing can often have either lower fees or lower rates. Additionally, the lender may allow borrowers to offer collateral other than the property mortgaged. This is a particular benefit to borrowers with limited access to credit. For some, though, conventional financing may not be feasible. Conventional loans generally require larger down payments than government-backed loans, making it difficult for many borrowers who do not have enough money saved to spend out-of-pocket. Due to the interest rates being set by individual lenders, they can exceed those of FHA and VA loans, both of which are government-backed.
However, for the most part, rates for conventional loans and for FHA loans do not vary significantly, as they are both competing in the same market.
Additionally, if the loan has a LTV (loan-to-value) greater than 80 percent, a borrower is required to purchase PMI (Private Mortgage Insurance), which can be paid monthly. This is not insurance for you - the home buyer, it is insurance for the lender in case the loan defaults. Please note that once your LTV drops below 80 percent, you may be able to drop your PMI. . Another option available to you at that point is to apply for a loan without having to purchase PMI, making conventional financing attainable and more affordable. USDA loans and VA are both government loans, but they have an additional benefit, no Mortgage Insurance! USDA Guaranteed Loans are charged an annual guarantee fee instead of mortgage insurance, the fee continues for the life of the loan!
There are additional programs available not mentioned here in this section. Please see additional information provided on the individual pages of our site. We are constantly adding new programs here for you to assist in growing your knowledge base as you continue in your journey!
If you are interested in reverse mortgages, renovation loans, ground-up construction loans, each with the option of 30-year fixed rate mortgages, please feel free to contact one of our professionals today, we are here to assist!