Conventional Loans compared to FHA

Conventional loans are mortgage loans offered by non-government sponsored lenders. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac the 2 main governmental sponsored entities, they sell bonds to fund loans so we can buy homes. It may have either a fixed or adjustable rate.While many think that a 20% down payment is required for all conventional loans, many lenders now offer low down payment options down to 3% if your scores are high enough.

The big difference between FHA and Conventional is that FHA forces you to pay mortgage insurance even if you have 20 equity,  and they compute it based on the balance of the loan being 20% lower than the original loan balance. A conventional loan will use the pay down of your balance AND your appreciation to current market. Also, FHA adds part of the mortgage insurance to your loan balance, so 3.5% down payment, then add the 1.75%UFMIP, up front mortgage insurance premium, to get your final loan amount. A 3% down Conventional loan is going to have a bal of 97%, BUT you must have higher scores to take advantage of it!

Conventional loans also have a HB, High Balance Conventional loan limit that can go up to $679,650 like SF county and Napa county. Solano county stops at a mear $460K then we are JUMBO loans.

If you have any questions on FHA, Jumbo, Conventional or VA loans, email or call me.