A conventional mortgage, often referred to as a conventional loan, is a prevalent option you'll encounter when exploring mortgage choices. Offered by most lenders, this loan type is one of the most common ways to finance a home.
A conventional mortgage or loan is a home buyer's loan that isn't secured or provided by a government entity. Instead, these mortgages are available through private lenders, including banks, credit unions, and mortgage companies.
Conventional mortgages are categorized into "conforming" and "nonconforming" loans:
Conforming Loans: These adhere to the guidelines set by Fannie Mae and Freddie Mac, government-sponsored entities that fund the U.S. housing market. The primary rule is the loan size limit, which was set at $647,200 for most of the continental U.S. in 2022. Higher-cost areas have higher limits.
Nonconforming Loans: These include jumbo loans for buyers who need to borrow amounts exceeding the conforming limit for their area. Other nonconforming loans are available to borrowers with poor credit, high debt, or recent bankruptcy, or those purchasing homes with a high loan-to-value ratio.
Conventional mortgages are categorized into "conforming" and "nonconforming" loans:
Conforming Loans: These adhere to the guidelines set by Fannie Mae and Freddie Mac, government-sponsored entities that fund the U.S. housing market. The primary rule is the loan size limit, which was set at $647,200 for most of the continental U.S. in 2022. Higher-cost areas have higher limits.
Nonconforming Loans: These include jumbo loans for buyers who need to borrow amounts exceeding the conforming limit for their area. Other nonconforming loans are available to borrowers with poor credit, high debt, or recent bankruptcy, or those purchasing homes with a high loan-to-value ratio.
Even with a conventional loan, you might qualify for down payment assistance. Various government agencies and community programs offer support to buyers in complex financial situations, regardless of the financing type used.
Conventional mortgages provide flexible options for many buyers, making homeownership accessible even without a large down payment.
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