The Conventional Loan Advantage
Conventional loans are a type of mortgage loan not insured or guaranteed by the government. Instead, private lenders back the loan. Conventional loans are also called conforming loans because they conform to guidelines Fannie Mae and Freddie Mac established. These government-sponsored enterprises buy mortgages from banks and resell them on the secondary market (also known as selling them into a pool). Since this results in more money returning to the lender, banks are encouraged to make more loans.
- Conventional loans are a type of mortgage loan not insured or guaranteed by the government. Instead, private lenders back the loan.
- Conventional loans are a type of mortgage loan not insured or guaranteed by the government. Instead, private lenders back the loan.
Conventional loans are referred to as conforming mortgages or conforming loans. This name stems from the fact that conventional mortgages conform to specific guidelines by Fannie Mae and Freddie Mac (the two mortgage giants) for how much money you can borrow, your credit score, etc.
What Does “Conventional” Mean?
Conventional loans are not insured or guaranteed by the government. Instead, they’re backed by private lenders. These loans also go by another name: conforming loans because they conform to guidelines established by Fannie Mae and Freddie Mac (the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation).
Conventional mortgages are generally better for people who want to control their destiny—to be a homeowner in a way that isn’t dictated by Uncle Sam or some other third party.
The word “conventional” means standard. Conventional loans are often (erroneously) referred to as “conforming mortgages” or “conforming loans” because they conform to the standards set by Fannie Mae and Freddie Mac.
Conventional vs. Non-Conventional Loans
Conventional loans are backed by private lenders and can be sold to investors. Conventional mortgages represent about 70% of all mortgages annually issued in the United States.
Non-conventional loans (also known as “jumbo” or “non-conforming” loans) are not backed by government agencies like Fannie Mae or Freddie Mac but rather by a private lender (like Wells Fargo). Borrowers with non-conventional mortgages may have more flexibility in terms of loan requirements than those who apply for conventional mortgages, such as higher debt ratios or lower credit scores—but this comes at a price: higher interest rates!
So, what’s the difference between conventional and non-conventional mortgages? The main difference between these two mortgage loans is how the government backs them. These government-sponsored enterprises buy mortgages from banks and resell them on the secondary market (also known as selling them into a pool). Since this results in more money returning to the lender, banks are encouraged to make more loans.
Conventional loans are backed by private lenders. Conventional mortgages are insured or guaranteed by the government, making them easier for banks to sell on the secondary market (also known as selling them into a pool). Since this results in more money returning to lenders, banks are encouraged to make more loans.
Mortgage Loan Insurance
Mortgage loan insurance is a type of mortgage protection plan. It is not a type of mortgage loan.
Mortgage loan insurance protects the lender against default on a loan by providing coverage for the property’s value in case the borrower defaults or fails to pay for other reasons. Private insurers provide mortgage insurance and government-backed agencies, including CMHC in Canada, Fannie Mae, and Freddie Mac in the United States—or some combination thereof, depending on where you live.
Mortgage loan insurance can be an excellent way to insure your mortgage if you cannot pay it. You must understand how much protection this insurance provides before deciding whether or not it is right for you.
Services We Offer
- FHA Loans
- VA Loans
- USDA Loans
- Jumbo Loans
- Private Money Loans
- Down Payment Assistance
- Conventional Loans
