Conventional mortgages, in contrast to FHA and VA guaranteed loans, are bought by Fannie Mae, Freddie Mac, or another financial institutions like a bank, credit union, or insurance companies. Because the secondary market is big and diverse, with a plentiful supply of funds to loan homebuyers, conventional mortgages have a lot of pluses such as:
They’re available through a variety of financial sources throughout the country and on the Internet. If you have a 20 percent plus down payment, you don’t have to pay the mortgage insurance or funding fees that FHA and VA government programs charge. You have a sizable buffet of loan options and programs to choose from.
Loan limits or the amount of money you can borrow are much higher than government guaranteed FHA and VA programs. Currently, Fannie Mae and Freddie Mac’s maximum loan amount is $322,700, although in 2002 their average loan was considerably less at $139,300, according to their Web site. If you can’t qualify for a conforming mortgage, there are many
smaller lenders who specialize in subprime or A-, B, C, or D
loans.
With subprime loans, the further down the alphabet you go, the higher the interest rate and loan costs go because the lender’s risk increases.
But, this is not all bad. Many borrowers who have to start out with an alphabet loan can rebuild their credit and refinance with an ‘‘A’’ loan after a few years.
They’re available through a variety of financial sources throughout the country and on the Internet. If you have a 20 percent plus down payment, you don’t have to pay the mortgage insurance or funding fees that FHA and VA government programs charge. You have a sizable buffet of loan options and programs to choose from.
Loan limits or the amount of money you can borrow are much higher than government guaranteed FHA and VA programs. Currently, Fannie Mae and Freddie Mac’s maximum loan amount is $322,700, although in 2002 their average loan was considerably less at $139,300, according to their Web site. If you can’t qualify for a conforming mortgage, there are many
smaller lenders who specialize in subprime or A-, B, C, or D
loans.
With subprime loans, the further down the alphabet you go, the higher the interest rate and loan costs go because the lender’s risk increases.
But, this is not all bad. Many borrowers who have to start out with an alphabet loan can rebuild their credit and refinance with an ‘‘A’’ loan after a few years.
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