Conventional Loans

Conventional loans are simply any mortgage loans that are not guaranteed by a government agency such as the Federal Housing Administration. Loans that are backed by these agencies are often tailored to borrowers with fairly average income and credit scores. On the other hand, borrowers with higher income and credit scores often look to conventional loan options for their needs as there is no government restriction on conventional loan amounts. Bank of England Mortgage offers a variety of conventional loan options designed to meet the needs Branford residents.

The two entities Fannie Mae and Freddie Mac purchase mortgages from lenders which they then resell in bulk to investors. These entities will only purchase loans that meet specific criteria. Loans eligible for purchase that meet their criteria are called conforming loans. Loans that are ineligible for purchase are called non-conforming loans. When determining eligibility, one of the first factors looked at is the size of the loan. These entities will not purchase loans that exceed $424,100 to meet eligibility. In certain high-cost areas, loan amounts can reach up to $636,150 and still meet eligibility. There are debt-to-income (DTI) and documentation guidelines that lenders must adhere to for a loan to be considered conforming as well.

Conventional loans are often selected simply because a borrower needs a loan that exceeds the maximum loan amount available for a government-insured loan. The jumbo loan is a very popular choice among homeowners looking to purchase higher-priced homes. A jumbo loan is simply a loan greater than the conforming loan limit for a particular area. Since these loans cannot be sold to Fannie Mae and Freddie Mac, lenders often keep the loans in their own portfolio. For some borrowers, this can mean slightly higher rates, down payment requirements, and insurance premiums.

You will also have the option of choosing between a fixed-rate mortgage, adjustable-rate mortgage (ARM), or a hybrid ARM which combines both a fixed-rate and adjustable-rate mortgage. Depending on your personal situation and future housing plans, there can be benefits to each of these options.

Fixed-rate mortgages are most commonly available as either 15-year, 20-year, or 30-year loans. The rate on a fixed-rate mortgage will never change no matter how long of a loan term you choose. Fixed-rate mortgages are preferred by many as they give peace of mind knowing that your mortgage payment will remain constant regardless of changes in the marketplace.

Adjustable-rate mortgages on the other hand have an interest rate that will vary from time to time. Hybrid ARMs take components from both fixed rate and adjustable rate mortgages. A 7/1 Hybrid ARM, for example, begins with a 7-year fixed period and each year thereafter there will be an adjustment to the rate. It is common for ARMs to start with a lower rate than comparable fixed-rate mortgages meaning you will pay less at the start of the mortgage. ARMs and Hybrid ARMs can be valuable options for someone who plans to relocate in the near future.

Bank of England Mortgage offers conventional loan options throughout Branford and all of Connecticut. Whether you are looking to purchase your very first home, or are interested in refinancing your current mortgage, we can tailor a conventional loan to your exact needs. For more information on all of our Branford conventional loan products, contact us today.