When it comes to home financing, a conventional loan is often the first option many prospective homeowners consider when working with their Meridian Mortgage Loan Officer. But what exactly are conventional loans and why are they so popular?
Understanding Conventional Loans
A conventional loan is a type of mortgage loan that is not guaranteed or insured by any government agency. It is typically fixed in its terms and rates and offered by private lenders like banks or mortgage companies.
Types of Conventional Loans
There are two primary types of conventional loans:
- Conforming Loans: These loans adhere to the borrowing limits set by Freddie Mac and Fannie Mae, two government-sponsored entities that buy and guarantee mortgages. The limit for these loans can change annually; your Meridian Mortgage Loan Officer can provide the most current information.
- Non-Conforming Loans: Also known as Jumbo Loans, these mortgages do not adhere to Freddie Mac and Fannie Mae guidelines, typically because the loan amount is higher than the conforming loan limit. They’re often used when purchasing higher-priced homes.
Benefits of Conventional Loans
Conventional loans offer several advantages:
- Flexibility: Conventional loans offer various terms, ranging from 10 to 30 years, and may include a fixed or adjustable-rate.
- Lower Cost Over Time: If you can afford a larger down payment, a conventional loan may cost you less over time. They typically have lower mortgage insurance costs, and if you can put down 20% or more, you can avoid mortgage insurance altogether.
- Higher Loan Limits: If you’re looking to buy in a high-cost area, a non-conforming conventional loan (Jumbo Loan) might be right for you.
We Can Help
The Meridian Mortgage Team is here to assist you with any of your home financing needs. We can help you navigate the process of securing a conventional loan or any other options that might better fit your particular circumstances.