Conventional Mortgage Loan Program

Conventional Mortgage Loan Program

The majority of borrowers in the United States that obtain a mortgage often go with a Conventional Mortgage Loan Program. Conventional loans  tend to be one of the most popular types of mortgage financing due to their accessibility.

In fact, 60% of U.S. homebuyers use a conventional loan when purchasing or refinancing a home1. According to the National Association of Realtors, 88% of home buyers financed their home purchase in 20192.

So, what does having a conforming conventional mortgage really mean?

In short, a conforming conventional mortgage refers to a mortgage that is within the conforming loan limit dollar cap, based on the corresponding residential property type (i.e. 1-4-unit dwellings), and is eligible for sale to Fannie Mae or Freddie Mac.

Conforming loan limits can be adjusted on an annual basis, usually from October of the current year to October for the next year. The national conforming loan limit for a 1-unit dwelling in 2020 generally changes every year1,3.

New Century Mortgage specializes in helping borrowers obtain conforming conventional mortgage financing.

Here is a brief overview of where conforming conventional mortgages came from, as well as some things you might want to consider before choosing a conventional mortgage loan for your next purchase or refinance.

Conforming Conventional Mortgage Loan Program Limits

Conforming loan limits have been around for some time. Since the enactment of the Housing and Economic Recovery Act of 2008, the Federal Housing and Finance Agency (FHFA) has been in charge of monitoring and adjusting the national conforming loan limits1.

Between the period of 2006-2016, the conforming loan limits set by the FHFA never really changed. However, since 2016 the conforming loan limit has increased by roughly $93,4001.

The loan limit are weighted heavily on median home values across the nation. These values, in general, increased in 2019, especially in high-cost areas. This has driven up the maximum loan limit while simultaneously increasing the baseline loan limit, resulting in new ceilings1.

Conforming Conventional Mortgage Loan Program

There are a lot of conforming conventional mortgage loan options available to borrowers looking to purchase a new home or refinance an existing mortgage loan.

You can choose from a variety of fixed rate or adjustable rate options. Borrowers also have the flexibility to choose a term that aligns with their overarching financing goals. If you are looking to pay off your loan faster, you may want to consider a lower term.

Keep in mind, in general, with a longer term you have more time to repay your mortgage, meaning your payments may be lower compared to a shorter repayment term.

Mortgage insurance may also be required for certain transactions, but is cancellable once there is enough equity generated within the home.

If costs are also a concern, you may have the options to roll some of those into the loan itself, minimizing your out of pocket expense.

Want to learn more about conforming conventional loan programs? New Century Mortgage can answer all your conforming conventional mortgage program related questions. We help clients obtain mortgages for conventional loans throughout Florida.

If you are interested in knowing what the difference and similarities between conforming and conventional mortgages are then review our article on Conforming vs Conventional.

Sources

1 Conventional Loan Rates and Requirements for 2020. (2020, June 18). Retrieved July 2, 2020, from https://themortgagereports.com/21489/how-to-buy-a-home-conventional-loan-mortgage-rates-guidelines#:~:text= Thanks to their wide availability, buy a house or refinance.

2 Home Buyers and Sellers Generational Trends Report (Rep.). (2019, August 16). Retrieved July 2, 2020, from National Association of Realtors website: https://www.nar.realtor/sites/default/files/documents/2019-home-buyers-and-sellers-generational-trends-report-08-16-2019.pdf

3 Fannie Mae and Freddie Mac loan limit increases to more than $510,000. (2019, December 13). Retrieved July 2, 2020, from Housing Wire website:  https://www.housingwire.com/articles/fannie-mae-freddie-mac-loan-limit-increases-to-more-than-510000/#:~:text=