CONVENTIONAL (CONFORMING) LOANS
A Conventional mortgage is sold to Fannie Mae or Freddie Mac and are not insured by any government agency, namely the Federal Housing Authority (FHA) or the Veterans Administration (VA). Therefore, these loans must meet Fannie & Freddie Guidelines and limits, such as:
- Minimum FICO score of 620
- Maximum Loan amount of $484,350- for a single family ( some counties have lower loan limits. Multi-family homes, up to 4 units, have higher loan limits)
- Minimum Down Payment of 3%-25% (depending on program limits and property types)
- Mortgage Insurance Options vary and is not required on all loans
CONVENTIONAL (HIGH BALANCE) LOANS
While both conforming and High Balance loans are considered Conventional, they differ based on the minimum and maximum loan amount and underwriting guidelines. High Balance loans were created to allow increased loan limits for all high-cost areas. In Massachusetts, the maximum limit under this program for single-family residences is $726,525. However, the actual limit varies for each county within the state.
FIXED VS ARMS
Conventional Mortgages can either have “fixed” or “adjustable” interest rates and the terms are available in 8-30 year lengths. Fixed Interest rate loans ensure the Principal and Interest payments stay consistent throughout the entire mortgage. Adjustable Rate Mortgages (ARMs) are based on a 30-year loan term with the interest rate adjusting to market rates during the life of the loan. Adjustment periods range from 1-10 years. These loans are attractive to borrowers who don’t plan to keep their property over the long term and will benefit from a lower initial interest rate. Initial rates on ARMs are typically lower than comparable fixed rates.
Conventional Renovation Loans:
Construction loan programs vary just as greatly as the homes and designs to be built. Whether you’d like to build a home on land you own, purchase land and develop it, or buy in a subdivision or community, we have options to help you.
Fannie Mae HomeStyle
- Down Payment Minimum: 5% Generally , 3% when combined with HomeReady or First Time home buyer program
- Mortgage Insurance Required: Only with less than a 20% down payment or 20% equity
- Purchase or Refinance: Both
The HomeStyle loan is a lot like the FHA 203k, but with a few major difference: the allowed repairs, the occupancy-type allowed, and the total costs. The HomeStyle loan allows more flexibility in the type of repairs that can be made. One major bonus is that this loan can be used to install or repair in-ground swimming pools and any other permanently affixed improvement that adds value (like an outdoor kitchen or garage).
This program allows renovation to second homes and investment properties. Also, because Fannie Mae does not have an up front Mortgage Insurance Premium, like FHA those who choose this program save by avoiding the 1.75% Up-Front fee.
This is a great option for those with higher FICO scores, or a large down payment, looking to install a pool or other “luxury items”, have lower debt to income, or for those who want to perform the work to a house they aren’t occupying.