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 refinance amount for a first mortgage at $417,000 (may be higher, subject to county loan limits) for a single-family dwelling. If the refinance 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. (To find out the county limit in your area, please click here). AnnieMac Home Mortgage offers conventional fixed rate loans, adjustable rate loans and interest only loans:
- With a fixed rate loan, your rate is fixed and your payment remains the same throughout the length of your loan (i.e. 30-years, 25-years, 20-years, 15-years or 10-years) A fixed rate loan is an excellent choice if you plan to live in the home for many more years.
- With an adjustable rate loan, your rate will adjust and your payments will fluctuate based on changes in the market. However, the rate and payment remains unchanged during the introductory period which could be 3, 5 or 7 years. The initial rate for an adjustable rate mortgage is usually lower than that of a fixed rate loan. After the introductory period expires, the interest rate is subject to adjust at predetermined periods, usually every six months. The rate adjustments are based on market interest rates and the adjustment caps limit how much your interest can adjust in a specified period of time. An adjustable rate mortgage is a great choice if you don’t plan to own the home for a long period of time.
- With an interest only loan, you only pay the interest on the principal balance of the loan for a set period of time (i.e. 5-years or 10-years) with the principal balance remaining unchanged for that period of time. Once the interest only period is up, the principal balance of the loan is then amortized for the remaining term of the loan (i.e. 20-years or 25-years). An interest only loan is a good choice if you are looking for more flexibility as your initial payments will be less for the first 5 or 10 years.
Loan to value ratios are often overlooked since the interest rate and loan term are the more important items to most people when refinancing. 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 refinance.
If your refinance is for a property that is a two-family, three-family or a four-family residence, please call AnnieMac Home Mortgage to receive the maximum loan to value ratios.