Any loan that is not guaranteed by a government agency is considered a conventional loan. Government agencies such as the Federal Housing Administration (FHA) and the U.S. Department of Veterans Affairs (VA) insure home loans to make homeownership easier for families. These government-backed programs are often tailored to families with lower income and credit scores. Conventional loans, on the other hand, tend to be popular among borrowers with stronger credit and higher income. At JZ Mortgage Services, Inc., we offer several conventional loan options to meet the unique needs of Florida residents throughout Bradenton, St. Petersburg, Sarasota, and Tampa.
Conforming vs Non-Conforming Mortgages
Conventional loans can be considered either conforming or non-conforming. Fannie Mae and Freddie Mac purchase mortgages from lenders which they then resell as packaged loans to investors. A conforming mortgage is one that is eligible for purchase by Fannie Mae or Freddie Mac, whereas non-conforming loans are not. In order for a loan to be considered a conforming loan, the loan must meet certain requirements. The size of the loan is the primary factor that is looked at when determining eligibility. Fannie Mae or Freddie Mac will only purchase loans that do not exceed $453,100. In specially designated high-cost counties, loan amounts can reach up to $625,500 and still be considered eligible. Lenders must also follow debt-to-income (DTI) and documentation guidelines.
If a loan does not meet Fannie Mae and Freddie Mac’s criteria, they are considered ineligible. These loans are called non-conforming loans. Jumbo loans are the most common non-conforming loans. A jumbo loan is a one that simply that exceeds the conforming loan amount for a specific area. Jumbo loans are popular among buyers interested in purchasing luxury or higher-priced homes. Since these loans cannot be purchased by Fannie Mae and Freddie Mac, non-conforming loans are often subject to higher rates, down payment requirements, and insurance premiums.
Conventional loans are available as fixed-rate mortgages, adjustable-rate mortgages (ARMs), or a combination of the two, referred to as hybrid ARMs.
Fixed-rate vs Adjustable-Rate Mortgages
Fixed-Rate Mortgage – A fixed-rate mortgage will maintain the same rate throughout the life of the mortgage. Fixed-rate mortgages are most commonly available as either 15-year, 20-year, or 30-year loans. Many people prefer a fixed rate mortgage as it offers peace of mind knowing that your mortgage payment will never change.
Adjustable-Rate Mortgage (ARMs) – The interest rate on an adjustable-rate mortgage will vary from time to time depending on market conditions. Hybrid ARMs combine both a fixed rate and adjustable rate period. For example, a 7/1 Hybrid ARM would have a 7-year fixed period followed by adjustments each year thereafter. ARMs often start out at a lower rate than fixed-rate mortgages meaning you will pay less early on. An ARM or Hybrid ARM can be a valuable option for someone who does not intend to stay in their home for very long.
JZ Mortgage Services, Inc. offers many conventional loan options designed to meet the unique needs of our Florida clients located throughout Bradenton, St. Petersburg, Sarasota, and Tampa. Whether you are looking to purchase your very first home, or are considering refinancing the mortgage on your current home, we will find the loan right loan for you. For more information on our conventional loan options, contact us today.