Any mortgage loans that are not guaranteed by a government agency, such as the Federal Housing Administration, are considered conventional loans. Government-backed loans are limited to specific loan amounts and are often tailored to buyers with average credit scores and limited down payment availability. Borrowers with above average credit and income, or borrowers shopping for more expensive homes often look to conventional loan options for their needs. Megastar Financial offers a variety of conventional loan options designed to meet the needs of California residents located throughout Oakdale, Modesto, Sonora, and Manteca.
The majority of mortgages are not kept by lenders, rather they are sold to government sponsored entities such as Fannie Mae and Freddie Mac. Before these entities will purchase a loan, the loan must meet specific criteria. Loans that meet these criteria and that are eligible for purchase are called conforming loans. Those that do not are considered non-conforming. One of the first factors looked when determining eligibility is the size of the loan. Loans that exceed a total amount of $424,100 are ineligible for purchase. In specially designated high-cost areas, loan amounts can reach up to $636,150 and still be eligible for purchase. There are debt-to-income (DTI) requirements and documentation guidelines that lenders must adhere to as well.
Borrowers in need of a loan that exceeds the conforming loan limits will need to look to conventional loan options. The jumbo loan is a very popular choice among homeowners looking to purchase higher-priced homes. A jumbo loan is a conventional loan that exceeds the conforming loan limit for a particular area. Most government-backed loans can only be used if a borrower will be occupying the home as their primary residence. If you are looking to purchase a second home or an investment property, a conventional loan may be the right loan for you.
Conventional loans are available as fixed-rate mortgages, adjustable-rate mortgages (ARM), or hybrid ARMs which combines both a fixed-rate and adjustable-rate mortgage. Depending on your personal goals and future housing plans, each option will have its benefits.
Most fixed-rate mortgages will be available as 15-year, 20-year, or 30-year loans. As the name suggests, the rate on a fixed-rate mortgage will never change regardless of loan term. Fixed-rate mortgages are often preferred as they offer the homeowner peace of mind knowing their mortgage payment will remain constant.
Adjustable-rate mortgages on the other hand have interest rates that will fluctuate. Hybrid ARMs are a combination of fixed rate and adjustable rate mortgages. A 5/1 Hybrid ARM, for example, begins with a 5-year fixed period followed by yearly adjustments. ARMs will often start with a lower rate than comparable fixed-rate mortgages meaning you will pay less at the start of the mortgage. This can make ARMs and Hybrid ARMs a great choice for someone who plans to relocate in the near future.
Megastar Financial offers a variety of conventional loan options throughout Oakdale, Modesto, Sonora, Manteca, and all of California. Whether you are refinancing your current mortgage, or looking to purchase your very first home, we can customize a conventional loan to meet your exact needs. For more information on the conventional loan products available, contact us today.