Conventional Loans
Conventional loans are "conforming" if they conform to GSE (Government Sponsored enterprise) and are generally $417,000 or less for a single-family home. Conforming loan limits can be higher in pricier regions of the country. In general any loan not meeting guidelines is considered non-conforming.There are also established guidelines for borrower credit scores, income requirements and minimum down payments. For example, most conventional loans require somewhere between 5 percent and 20 percent down.
Technically speaking, a conventional loan is any mortgage that is not guaranteed or insured by the US government, such as VA, FHA and USDA.
Conventional mortgages include portfolio loans, construction loans, and even subprime loans. But again, whenever a lender refers to a “conventional loan” they are most likely referring to conforming mortgages that are eligible for purchase by Fannie Mae and Freddie Mac.
Loan Limits within the Auburn & Lewiston, Augusta, Portland and Brunswick, Maine areas;
One Unit up to $417,000
Two Unit up to $533,850
Three Unit up to $645,300
Four Unit up to $801,950
To Consider
Cost
Origination fees, down payments, mortgage insurance, points and appraisal fees can mean the borrower has to show up at closing with a sizable sum of money out-of-pocket, or be prepared to roll over some of these costs into their mortgage amount, which may result in a higher loan rate.
Pros
Conventional mortgages generally pose fewer bureaucratic hurdles than FHA or VA mortgages, which may take longer to process because of the red tape. And because these mortgages generally require higher down payments than the others, home equity can build up faster.
Cons
Most will need excellent credit to qualify for the best interest rates. Also, many lenders require higher down payments than for government-backed loans. In declining markets such as this one, borrowers may only qualify for 90 percent loan-to-value and have to come up with the rest out of pocket. Some lenders may require as much as 20 percent down, particularly for condominiums in markets where it's difficult to get mortgage insurance.
Who they're good for: Conventional loans are ideal for borrowers with excellent credit who can afford a down payment of 5 percent or more.
