There are a variety of loan products and the 4 most commonly used are Conventional, FHA, VA, and USDA.
A Conventional loan, sometimes called “Conforming” loan, is a generic term for what most people probably envision when they think of a mortgage. These loans were originated by lenders and later sold to Fannie Mae or Freddie Mac who provide guidelines on what loan characteristics they are going to purchase. These loans “conform” to the guidelines, hence the name.
A conventional loan in Tucson can go as high as $484,350. That limit varies across the country based on cost of living conditions but is fairly stable in Arizona. If a loan amount Exceeds $484,350 the loan falls into a “Jumbo Loan” category, which we will discuss these in a later post. Keep in mind, the $484,350 is the loan amount, which means the purchase price can be higher!
A borrower can put as little as 3% down on a conventional loan. However, any time the down payment is below 20%, the borrower must also pay mortgage insurance (another topic we will cover in upcoming weeks).
The loans can be used for Primary Homes, Second Homes, and Investment properties. The property can be a single family residence up to a 4-plex and loan amount limits increase if the property has more units.
Conventional loans have stricter credit requirements than some other programs and the lower the credit score, the higher a borrower may pay in rate and fees.
This is just one of the loan products available to meet consumer needs other options include FHA, VA, and USDA.