conventional home loans

Understanding Conventional Loans

What Is a Conventional Loan?

A conventional mortgage or conventional loan is any type of home buyer’s loan that is not offered or secured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) or the USDA Rural Housing Service, but instead is available through or guaranteed by private lenders (banks, credit unions, mortgage companies) or the two government-sponsored entities (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

What is Fannie Mae FNMA?

What is Fannie Mae? Fannie Mae is The Federal National Mortgage Association. Its loans help lenders originate mortgages in a safe and sound manner. Fannie Mae funding makes products such as the 30-year fixed-rate mortgage possible for low to moderate income borrowers. It provides homeowners with stable, predictable mortgage payments over the life of the loan. Fannie Mae enables  lenders to originate and tailor mortgage loans to meet the needs of today’s borrower. 

What is Freddie Mac FHLMC?

What is Freddie Mac?  Freddie Mac is the Federal Home Loan Mortgage Corporation. It is a government sponsored entity, or GSE. Freddie Mac also has a 30 year fixed rate mortgage product. There are three advantages of the 30-year, fixed-rate mortgage, whcih explains their overwhelming appeal to homebuyers.

Affordable: First, the longer term means the principal is paid back—that is, “amortized’—over a longer time period. Second: That means the monthly payments are lower than a 15-year fixed-rate mortgage. Third: this is fundamental to making homeownership viable for first-time home buyers in their early earning years. Just like the Baby Boomers, Millennials rely heavily on the 30-year fixed-rate mortgage because the lower payments are more affordable and manageable when first getting started

California Conventional Loan Lenders

Private lenders, such as credit union, banks and mortgage companies, are another source of conventional loan funding. 

Conventional Loans vs FHA

Conventional loans are the most common types of loans in the mortgage industry. They’re funded by private financial lenders and then sold to the government-sponsored entities Fannie Mae and Freddie Mac.

These loans have stricter requirements than FHA loans. You’ll need a higher credit score and a lower debt-to-income (DTI) ratio to qualify for a conventional loan than you otherwise would with an FHA loan.

The Pros of Conventional Loans

  • If your down payment is at least 20%, you can avoid paying private mortgage insurance (PMI).
  • In most counties, you can typically borrow more than you can with an FHA loan.
  • Mortgage rates are typically lower for conventional loans than FHA loans.

The Cons of Conventional Loans

  • You’ll have to pay PMI if your down payment is less than 20% of the loan amount.
  • The loan qualifications are stricter, requiring a minimum credit score of 620 and lower DTI ratio.

Conventional Loan Types

What are conventional loans? There are various conventional loan mortgage products that fit under the private lender and Fannie Mae and Freddie Mac umbrellas:

  1. 30 fixed rate fully amortized loans
  2. 15 year fixed rate fully amortized loans
  3. Adjustable Rate Mortgages (ARM)
  4. high balance loans
  5. high LTV refi options
  6. Jumbo Loans

Conventional Loan Limits for 2019

What are the conventional loan limits for 2019? The Federal Housing Finance Agency (FHFA) set the maximum conforming loan limit for conventional mortgages to be acquired by Fannie Mae and Freddie Mac in 2019 for one-unit properties at $484,350 for most areas in the United States. 

The Housing and Economic Recovery Act (HERA) requires the baseline conforming loan limit be adjusted each year. In High-cost area the limits are adjusted differently. For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling” on that limit of 150 percent of the baseline loan limit. Median home values generally increased in high-cost areas in 2018, driving up the maximum loan limits in many areas.  The new ceiling loan limit for one-unit properties in most high-cost areas is $726,525 — or 150 percent of $484,350 for 2019. 

Contact Us Today

Jumbo Loans

A jumbo loan, or jumbo mortgage, is a home loan that exceeds the limits set forth by the FHFA Fannie Mae loan limits. A jumbo loans are not secured by the GSEs Fannie Mae or Freddie Mac, nor are they purchased or guaranteed by them. These loans are designed for luxury properties and are highly competitive in our local real estate markets. Jumbo loans have unique underwriting requirements by the lender and their own tax implications. 

The baseline loan limit for jumbo loans is $726,525, as set forth by the FHFA. This amount might be even higher in areas with even higher home values. 

The credit requirements for a jumbo loan are more difficult for the home buyer, because there is more risk involved for the lender. Since the jumbo loan is not securitized by the GSEs Fannie Mae or Freddie Mac, the risk is considered greater for the lender. A higher credit score is required for a jumbo loan. The lender generally will require a credit score of 700 or more for a jumbo loan. The lender will also require a very low debt to income ratio (DTI), under 43% but preferably closer to 36%. 

The key take always to remember about jumbo loans:

  1. A jumbo loan exceeds the FHFA conforming loan limits and cannot be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac.
  2. Home buyers must undergo more stringent credit requirements, credit scores of 700:or more and DTI of 43%:or less.

If you’re looking for affordable conventional home loans in Topanga, Woodland Hills, Santa Monica, Malibu, Pacific Palisades, West Hills, Calabasas, Encino, Sherman Oaks, Beverly Hills and the greater Los Angeles area:

contact Dorothy Reik directly at 310-291-1300, 310-455-4050; 818-226-6100, CalBRE Lic #01233829, NMLS Bankers Group ID #294230 (B&P 10140.6(b); Regulation 2773). 

Bankers Group Woodland Hills office is located at 5311 Topanga Canyon Blvd Suite 201, Woodland Hills, CA 91364.

bankersmgroup, woodland hills, hard money loans, high balance loans, high LTV refinance options

Conventional Home Loans

At Bankers Group, we seek to serve qualified homebuyers who may have difficulty getting approved for a conventional home loan in today’s market.  For one unit properties, loans can be obtained at a maximum of at $484,350. In our high-cost area of Los Angeles, the maximum loan limit for a conventional loan is $726,525 — or 150 percent of $484,350 for 2019. 

30 year fixed rate fully amortized loans, 15 year fixed rate fully amortized loans, Adjustable Rate Mortgages (ARM), high balance loans, high LTV refi options, these are some of the options available to you with a conventional loan.

At Bankers Group, our goal is to serve your home loan needs by matching you with the right home loan package.

Apply Today

Apply today to start on the road to your dream home or your first home purchase.

At Bankers Group, we work with home buyers at all levels. Whether you’re just starting out, or you’re refinancing a long-standing loan, we’ve got a loan package designed for you. 

Contact Us Today