Conventional Mortgages

The legal definition of a conventional loan is a 30 year fixed mortgage. The industry refers to conventional loans as conforming loans. That is loans that conform to the requirements of Fannie Mae and Freddie Mac. Conventional loans can also include adjustable rate mortgages. These are mortgages which are fixed for a period of time and then the interest rate can adjust based upon the movement of an index.

All lenders make the same loans that conform to the agency guidelines. If a loan does not conform it cannot be sold into the secondary mortgage market. The secondary mortgage market is the source for almost all funds that go into home mortgages.

Mortgage loans are priced based upon a spread over a Treasury security. Fixed-rate loans are influenced by the rate on the 10 year fixed rate Treasury. Five-year adjustable loans are influenced by the rate of shorter-term Treasury securities. At this time because of the inversion of interest rates thirty-year fixed-rate loans are cheaper than adjustable rate loans. This situation will change as Treasury security prices change.

The current upper limit for conventional conforming loans is $726,200. Approximately 80% of the loans that we do are conforming loans. Your loan officer will discuss with you the advantages and pricing of different kinds of loans. Get a free loan quote or start your loan on line. Call us 480 970 0990.