What Are Conventional Mortgage Loans?

Category ยท Loan Programs

Published on August 7, 2018

Conventional mortgages are those that are not financed or guaranteed by the federal government. Almost all of these mortgages come from either Freddie Mae or Fannie Mac. Even if the loan does not come directly from Freddie Mae or Fannie Mac, all conventional mortgage loans adhere to the guidelines that they have set forth. These loans can come with either a fixed or an adjustable rate.

Who Should Consider Conventional Mortgages?

There are two main types of conventional mortgages, each of which are aimed at a specific group of prospective home buyers. The following describes what each type of conventional mortgage is and who it is (generally) best suited for:

Conventional Fixed Rate Loans:

Conventional Fixed Rate Loans that are offered by First Savings Mortgage are aimed at those who intend on staying in the home they are purchasing for at least the next 7 years. These loans can come with a variety of different loan periods to them including 15, 20, 25, 30, or even 40 year payback periods. Amortization terms are customized by our loan experts to meet the needs of each individual home-buyer and their situation. Loans will be guaranteed by either Freddie Mac and Fannie Mae.

Conventional Adjustable Rate Loans:

Conventional Adjustable Rate Loans (ARM loans) are intended for homeowners who will be in their new homes for at least 5 to 10 years. ARM loans are great for those looking for a lower rate. Our loan experts here at First Savings Mortgage will help you determine what loan is right for you, whether it's a 5, 7, or 10 year fixed period. Amortization terms for these loans will apply over a period of about 30 years but 40-year amortizations are offered as well.

There are several down payment decisions to consider with conventional fixed rate and adjustable rate loans. These include low-down payment solutions, no monthly mortgage insurance options, and first and second trust combination loans just to name a few available to you as a home buyer.

What Does Not Qualify As A Conventional Loan?

Loans that are not endorsed by Freddie Mac or Fannie Mae are not subject to the terms listed above. The following list outlines some of the types of loans that are not covered by these terms and conditions:

  • FHA Loans who are aimed at buyers who are not able to afford the traditional 20% down payment of a traditional mortgage or for those who do not have ideal debt to income ratios for a traditional mortgages.
  • VA Loans which are available to members of the military and their families.
  • USDA Loans which are available for only low-to-moderate income earners living in more rural areas of the country
  • Jumbo Loans which are available for excellent borrowers and those with excellent credit looking to finance that are larger than the amounts that are covered by either Freddie Mac or Fannie May.

If you are looking to stay in your home for 5 or more years and are using a traditional mortgage to purchase your home, consider using conventional fixed rate loans or conventional adjustable rate loans for your home purchase to take advantage of the benefits they can offer you.