Conventional Loans in Lynden, WA and Beyond

Reliable Conventional Loans

Are you considering various home mortgages in Lynden, WA and the surrounding region? Conventional loans are mortgage loans that are not backed or insured by the government. Unlike government-backed loans such as FHA loans (insured by the Federal Housing Administration) or VA loans (guaranteed by the Department of Veterans Affairs), conventional loans are funded and insured solely by private lenders or investors. These loans typically follow guidelines set by Fannie Mae or Freddie Mac, two government-sponsored enterprises that buy and securitize mortgages on the secondary market. Reach out to Neighborhood Mortgage today to learn more about our conventional loan services.

Key Characteristics of Conventional Loans Includes

• Down Payment: Conventional loans often require a higher down payment compared to government-backed loans. While down payment requirements can vary, they typically range from 5% to 20% of the home’s purchase price. In some cases, as low as 3% down.
• Credit Score: Lenders usually have stricter credit score requirements for conventional loans compared to government-backed loans. Borrowers typically need a good to excellent credit score to qualify.
• Loan Limits: Conventional loans have a maximum loan limit set by Fannie Mae and Freddie Mac. These limits can vary by location and are adjusted annually.
• Private Mortgage Insurance (PMI): If the borrower’s down payment is less than 20% of the home’s purchase price, they may be required to pay for private mortgage insurance to protect the lender in case of default until they have sufficient equity in the home.
• Interest Rates: Interest rates for conventional loans can vary based on factors such as the borrower’s credit score, down payment amount, and market conditions.

Types of Conventional Mortgages

There are several types of conventional mortgages, and the terms used to refer to them can be confusing.

• Conforming Conventional Loans: As mentioned above, conforming conventional loans are loans that adhere to the standards set by Fannie Mae and Freddie Mac.
• Jumbo Loans: Jumbo loans allow you to borrow more than the maximum lending limit for conforming loans. However, they typically require a higher credit score, a lower debt-to-income (DTI) ratio, and a larger down payment.
• Portfolio Loans: A portfolio loan is a conventional loan that a lender chooses to keep in its own portfolio rather than selling it on the secondary market.
• Subprime Loans: Conforming loans require that you have a DTI below 50% and a credit score of 620 or higher. But if your credit score is lower, you may qualify for a subprime mortgage loan.
• Amortized Conventional Loans: These loans are known as fixed-rate loans. These loans are fully amortized, giving homebuyers a set monthly payment (interest and principal) from the beginning to the end of the loan repayment period.
• Adjustable-Rate Loans: With an adjustable-rate loan, there is a fixed interest rate for a set period, typically three to ten years. After that, your rate can vary each year.

Conventional loans offer flexibility and may be suitable for borrowers who have good credit, a stable income, and can afford a higher down payment. They are commonly used for purchasing primary residences, second homes, and investment properties.

There are several options, and working with Neighborhood Mortgage, we will help you determine what loan is best for you. Contact our team today to get started.