What are conventional home loans?
A conventional loan is a mortgage originated and serviced by a private lender (like a bank, credit union, or mortgage company) and used in the purchase of real estate. This loan type is available in a variety of loan term options and is advantageous for those coming in with a strong down payment and good credit history. By far the most popular type of home loan in New Mexico, conventional home loans are loans that are not insured or guaranteed by any government program like the VA, USDA, or FHA.
Conventional loan quick view
- Borrow up to 97% of a home’s value
- Good credit or above and job history
- Private mortgage insurance (PMI) required for down payments of less than 20%
- Managed in-house
- Simple & secure online application
Your Custom Conventional Loan Rate
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Difference between conforming and nonconforming loans
Conventional loans can be deemed as either conforming and nonconforming. In a nutshell, conforming loans meet, or “conform” to, guidelines and loan size limits set by the Federal Government, while nonconforming loans do not.
Conforming loan limits are set each year by the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, the two main financial corporations that purchase mortgages from lenders. Conforming loan limits have a set baseline amount, however they may be higher depending on the county you live in and whether it has been designated as a “higher-cost” area.
An example of a nonconforming loan is a jumbo loan. Jumbo loans (also called jumbo mortgages) are loans written for an amount that exceeds the conforming loan limits.
Under the fixed-rate option, your interest rate and monthly payment will remain the same, even if the market rates increase. This makes it the most popular loan as it offers the security of knowing exactly what your mortgage payment is for the entire length of your loan, which protects you from rising interest rates, no matter how high interest rates go.
Adjustable-rate (ARM) option
Adjustable-rate mortgage (ARM) options [typically have lower initial interest rates than fixed-rate mortgages. The interest rate and monthly principal & interest (P&I) payments remain the same for an initial period of time (such as 5, 7, or 10 years), then adjusts to reflect market conditions up to a yearly and max rate cap limit – meaning your rate can rise (or fall) over time. This option may provide flexibility if you plan to move, pay off your loan or refinance before the initial rate adjusts.
If you’re interested in purchasing or refinancing a home in Las Cruces or accross New Mexico, I can help you make it happen. Please contact me today or apply online in less than 10 minutes using the secure online application below.