CONVENTIONAL

LOANS

What is a Conventional Loan?

Conventional loans are any mortgage that is not guaranteed or insured by the federal government. Although a conventional loan is not insured or guaranteed by the government, it still follows the guidelines of government sponsored enterprises, Fannie Mae and Freddie Mac.

Conventional loans may be “conforming” and “non-conforming”. Conforming loans follow the guidelines set by Fannie Mae and Freddie Mac. These guidelines put the maximum purchase amount for a first mortgage at $647,200 (may be higher, subject to county loan limits) for a single-family dwelling. If the purchsase is for a property that is either a two-family, three-family, or four-family dwelling, larger values apply before the loan is no longer considered a conventional loan.

NEXA Mortgage, LLC offers conventional fixed rate loans, adjustable rate loans and interest only loans:

Fixed Rate

With a fixed rate loan, your interest rate stays the same for the entire term of the loan, and your monthly payment never changes. Common loan terms include 30, 25, 20, 15, or 10 years. This type of loan provides long-term stability and predictable payments, making it an excellent choice if you plan to stay in your home for many years and prefer consistency.

Adjustable Rate

With an adjustable rate loan, your interest rate and monthly payment can change over time based on market conditions. The rate remains fixed during an introductory period, typically 3, 5, or 7 years, and is often lower than a fixed rate loan. After that period, the rate adjusts at set intervals with caps that limit changes. This option is ideal if you plan to sell or refinance within a few years.

Interest Only

With an interest only loan, you pay only the interest on the loan balance for an initial period, usually 5 or 10 years, while the principal remains unchanged. After that period ends, the loan converts to full principal and interest payments over the remaining term. This loan offers lower initial payments and added flexibility, making it a good choice for certain financial strategies.

The Details are Important

Loan to value ratios are often overlooked by homebuyers. For most, the interest rate and loan term are the more important items. However, the loan to value ratio is a key factor in your application. Loan to value ratios vary depending on the type of property you are looking to purchase.

If your purchase is for a property that is a two-family, three-family or a four-family residence, please call Nexa Home Mortgage to receive the maximum loan to value ratios.