What is a Conventional Loan?
A conventional loan is any mortgage that is not guaranteed or insured by the federal government. A conventional loan generally refers to a mortgage loan that follows the guidelines of government sponsored enterprises (GSE’s) like Fannie Mae or Freddie Mac. Conventional Loans are used to finance primary residences, second homes and investment property, warrantable condos, planned unit developments, modular homes, manufactured homes
Most Conventional Mortgages are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same for the entire loan period. A less common option is the conventional adjustable rate mortgage (ARM), in which initial interest rates and monthly payments are low, but these may change during the life of the loan. Additionally, conventional loans may be either “conforming” or “non-conforming”. Conforming loans follow the terms and conditions set by Fannie Mae and Freddie Mac. Nonconforming loans do not meet Fannie Mae or Freddie Mac guidelines, but are also considered conventional.
Typical conventional loan qualification requires an assessment of:
- Income and monthly expenses – standard debt-to-income ratios are 28/36 for Conventional Loans. These ratios may be exceeded with compensation factors.
- Credit history – a FICO score of 620 or above is very helpful to get approval, however this is flexible.
For more information on Conventional Mortgage Loans, please feel free to contact us or call: 888.927.3256.
Allied Mortgage Direct has competitive rates and serves Philadelphia, Wilmington, Camden, Trenton and PA, NJ, NY, MD, NH and DC.