Conventional loans are mortgage loans provided by lenders who are not government-sponsored (e.g., FHA, VA or RHS). There are many loan types to select from.
Categories include:
Fixed Rate Loans
Adjustable Rate Loans (ARMs)
Combination (Hybrid) Loans
Balloon Mortgages and Pledge Asset Loans
Jumbo / Construction Loans
Reversible Mortgage
Conforming Loans
Conforming loans are conventional loans that meet terms and conditions set forth by Fannie Mae and Freddie Mac.
These two stock-holding companies purchase mortgage loans from lending institutions and secure them for resale to the investment community. Buying back mortgage loans allow these agencies to provide a continuous flow of affordable funding to banks that reinvest their money back into more mortgage loans.
Fannie Mae and Freddie Mac establish maximum loan amounts, income requirements, down payment requirements, and type of suitable properties. Loans that do not conform to these guidelines are referred to as non-conforming loans.
Jumbo Mortgage Loans
These are loans that are above the maximum loan amounts established by Fannie Mae and Freddie Mac. Rates on jumbo loans are generally a little higher than conforming loans. Jumbo loans are used to purchase expensive and high-end custom construction homes.
Government Loans
Different governmental agencies will secure mortgage loans for low- to moderate-income and other qualified home buyers. Lenders are required to follow certain guidelines when making government loans.
The most common government loans include FHA Loans, VA Loans, and RHS Loans.
FHA Loans
FHA loans have lower down payment requirements and are easier to qualify for than conventional loans. FHA loans are administered by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development.
