What Is A Conventional Loan?
Conventional loans (aka conforming loans), is a mortgage that is not insured or guaranteed by any government agency, included the Farmers Home Administration (FmHA), the Federal Housing or the Department of Veterans Affairs (VA). A conventional loan is typically fixed in its terms, have lower costs, have great rates, and offer home buying flexibility. Approximately 60% of mortgage applicants prefer conventional loans, since there are standards set by the two giants of the mortgage industry; Fannie Mae and Freddie Mac.
Highlights of Conventional Loans
- These loans can be used to buy a primary residence, a rental property, or a vacation/second home.
- Down payments offer can be as low as 3%
- Available in fixed rates, and many offer loans ranging from 10 to 30 years
- Lower mortgage insurance costs (PMI) than FHA
- When the home’s equity reaches 20%, the mortgage insurance becomes cancelable
Conventional Loan Limits For 2017
Generally, for 2017, the conventional loan limit is $424,100. However, higher limits are set by Fannie Mae and Freddie Mac for high-cost areas. For example; a single-family home located in Seattle, could have a loan limit of $592,250 and in Los Angeles, California a loan amount for the same home could go for up to $636,150.
Standard loan limits set for 2-, 3-, and 4-unit homes are as follows.
- $424,100 for a 1-unit home
- $543,000 for a 2-unit home
- $656,350 for a 3-unit home
- $815,650 for a 4-unit home
Properties Eligible for Conventional Financing
- Single family homes
- 2-, 3-, and 4-unit properties
- Some co-op properties
- PUDs, or Planned Unit Developments (detached homes)
- Manufactured homes
Income And Asset Documentation Required To Qualify For Conventional Loan Program
Just like with most other loan types, you need to provide the following things:
- 30 days of pay stubs
- 60 days of bank statements
- 2 years of W2s
- 2 years tax returns, documentation if you have rental properties, a profit and loss if you are self-employed, or non-salary income like pension, retirement statements, etc.
- Rental agreements for properties currently owned by you
- 2 years of 1099s, retirement, social security, or pension award letters
If you have any questions related to conventional loan programs, please feel free to contact us at www.unitedcounselors.org.
To find out more information: Ultimate Facts About 20% Down Payment Conventional Mortgages