How can I apply for a conventional mortgage?
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Question: What does applying for a conventional loan mean? Is it a federally-insured loan? Can you get a conventional loan when you first buy a home and when you refinance?
Answer: “Conventional” loans are mortgages that meet certain standards established by big loan buyers such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac will buy loans from lenders which meet certain standards. By meeting those standards a loan can be seen as “conventional” financing.
Why does a local lender want to sell a mortgage? To replace capital so that new loans can be made and new fees generated. Conforming loans can be sold immediately to Fannie Mae, Freddie Mac and other private mortgage buyers without hassles or complications.
What does it mean to you? Conventional loan standards tend to be cautious and conservative. Expect lenders to verify income and employment, to check tax returns and ask a bunch of questions. Don’t be offended — you’d do the same thing if a stranger asked you for money.
Just to test the market, ask lenders about non-conforming loans, mortgages that sometimes have better terms and more liberal qualification standards.
If you need a big mortgage, then look for the word “jumbo” – that means a loan amount above the conventional mortgage limit as well as a loan with a somewhat higher cost.
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Syndicated originally by Content That Works and posted with permission.
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