These are mortgages that follow the guidelines set by Fannie Mae and Freddie Mac. There are Fixed Rate Mortgages (FRM’s) & Adjustable Rate Mortgage (ARM’s). Typically ARM’s will have a lower interest rate but are a little more risky due to the rate not being fixed for the life of the loan. All conventional mortgages payments are due on the 1st of the month with a 15 day grace period. No prepayment penalty. The current max loan limit for conventional mortgages is $510,000. The minimum down is 3.00% but ideally starting with 5% down. When borrowers pay less than 20% down, mortgage insurance (MI/PMI) is required, and a fee is added to your payment each month.
Terms for the Fixed Rates are 5, 10, 15, 20, 25 & 30 years. ARM’s will be fixed for a specific time period (3, 5, 7 or 10 years) amortized (calculated) over 30 years. Once the initial fixed rate time period is over they become adjustable rates for the remainder of the term. There are caps to how high the rate can go once the fix rate period is over.
“Quick Facts About Conventional Loans”