Flexible Rates and Terms with Conventional Loans
At Riverside Mortgage Group, we specialize in finding the best-suited home financing solution for each borrower’s unique needs. Conventional loans are not guaranteed or insured by any government agency; instead they are fully funded and insured by private lenders. At Riverside Mortgage Group, we work with several national lenders with competitive interest rates and variable terms. Read on to learn more about these loans and contact us for a free quote. Mortgage professional David Sefton finances clients in Beaverton, Portland, Gresham, and Oregon City, OR, so give us a call today.
Conforming and Nonconforming Conventional Loans
Conventional loans are not regulated by any government agency like the FHA, VA, or USDA. Private lenders determine their own interest rates and eligibility requirements, without the input of a government agency. There are two main divisions of conventional loans: conforming and nonconforming. Conforming loans conform to limits set by government-sponsored entities Fannie Mae and Freddie Mac. These companies purchase loans from private lenders and repackage them on the secondary market. GSEs aren’t government agencies, but they do set limits on which loans they will buy to mitigate risk.
Loans that exceed the GSE limits in a given county are nonconforming loans or “jumbo loans.” Lenders keep these loans on their own books, which means they pose more of a risk to lenders in case a borrower defaults on payment. For borrowers, this means more stringent approval requirements, a larger down payment requirement and, in some cases, higher interest rates. The conforming limit in most Oregon counties is $453,100.
Rates and Terms
Conventional loans may have fixed interest rates or adjustable rates (ARMs). Fixed-rate loans have a set interest rate for the life of the mortgage, which means consistent payments. ARMs typically have a fixed rate for a few years, then the rate increases on regular intervals thereafter. Conventional loans have terms typically ranging from 10-30 years.
Down Payments and PMI
Typically, conventional loans require a larger own payment than nonconventional loans. If you put down less than 20% on a conventional loan, you’ll need to pay for private mortgage insurance (PMI) until you’ve reached 20% equity. In some cases, you can secure a piggyback loan to incorporate part of the cost of your insurance into your monthly payments. You can also use a gift from someone as a down payment on most conventional loans.
To get approved for a conventional loan, you should be prepared to supply proof of income, tax returns and W2s, a credit report, and bank statements. You should have a good or better credit score and a low debt-to-income ratio (usually less than 40% is a good benchmark).
We’re Here to Help You Achieve Your Dreams
At Riverside Mortgage Group, we offer one-on-one attention backed by the power of national lenders with competitive rates. If you’re interested in purchasing a home in Beaverton, Portland, Gresham, or Oregon City, we’d love to help. We offer free quotes and are here to answer any questions you have about conventional loans or any other type of home financing.