Conventional Mortgage Rate Search

Fannie Mae and Freddie Mac Conventional Mortgages

conventional loan is a mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), the Farmers Home Administration (FmHA) and the Department of Veterans Affairs (VA). It is typically fixed in its terms and rate.

Credit score requirements for conventional mortgages vary by lender; however, in most cases the minimum credit score for a conventional mortgage is 620. Some lenders, however, will underwrite mortgages with credit scores as low as 580; it is simply up to each lender as to what score is the cutoff.  Mortgage insurance becomes very expensive on a conventional loan as a borrowers credit score approaches 620.  Most borrowers would be better off with an FHA Mortgage if their credit scores are under 680 or if they do not plan of owning the home for 7.5 years or more.

Conventional loans require mortgage insurance if a borrower has under 20% as a down payment.  The best rates on a conventional loan normally occur when a borrower has a credit score over 760 and 25% or more as a down payment.

Conventional loans require a minimum or 5% down unless they are an Affordable Conventional Mortgage.  Affordable Conventional Mortgages at 3% are available thru state HFA’s, or from Fannie Mae and Freddie Mac via the Home Ready or Home Possible programs.

Fannie Mae, the commonly used nickname for the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, are government-sponsored enterprises, or GSE’s, tasked with the mission of bringing liquidity, stability and affordability to the U.S. housing market. … Once the mortgages have been purchased, banks are freed up to make more loans.

Fannie Mae and Freddie Mac are tasked with delivering homes to the general home buyer market and as such, do not offer loans in every price range.  Homes that are in the Conventional Price Range  can be purchased by Fannie Mae and Freddie Mac from your lender.  This free’s up you lender to use the capital to help other borrowers buy also.

Without a secondary market, mortgage lenders would be more reluctant to lend to you, because the lender’s money would be tied up as you gradually repay it over the years. When the lender sells your mortgage, the lender gets the money back immediately, at a profit.

The Conventional Loan Limits are based on number of units in the property between 1-4 and the normal cost of homes in the area.  The limits for 2018 are as follows:

Maximum Loan Amount for 2018

Units Contiguous States, District of Columbia, and Puerto Rico Alaska, Guam, Hawaii, and the U.S. Virgin Islands
1 $453,100 $679,650
2 $580,150 $870,225
3 $701,250 $1,051,875
4 $871,450 $1,307,175

Maximum Loan Amount for High-Cost Areas for 2018

Units Contiguous States, District of Columbia+ Alaska, Guam, Hawaii, and the U.S. Virgin Islands
1 $679,650 $1,019,475
2 $870,225 $1,305,325
3 $1,051,875 $1,577,800
4 $1,307,175 $1,960,750

+A number of other states and Puerto Rico do not have any high-cost areas in 2018.

Affordable Conventional Mortgages

There quite a few types of Affordable Conventional Mortgages.

HomeReady:  HomeReady is  Fannie Mae’s affordable, low down payment mortgage product designed for creditworthy
low- to moderate-income borrowers, with expanded eligibility for financing homes in low-income communities.  Community Seconds are allowable to be used for the borrower’s down payment when using a HomeReady mortgage.  In most cases, it is easier to use one of the state HFA programs if you need down payment assistance.  HFA lenders are able to do both your first mortgage and your down payment assistance at the same time.

 Low down payment; as little as 3% down for home purchases
 Flexible sources of funds with no minimum contribution from borrower’s own funds
 Non-occupant borrowers permitted
 Cancellable mortgage insurance (restrictions apply)
 Reduced MI coverage requirement for loan-to-value ratios above 90% (up to 97%)
 Pricing is better than or equal to Fannie Mae’s standard loan pricing (risk-based pricing waivers for LTV ratios > 80% with a credit score ≥ 680)

HomePossible:  Home Possible mortgages by Freddie Mac offer low down payments for low- to moderate-income home buyers or buyers in high-cost or under served communities.  Community Seconds are allowable to be used for down payment.  In most cases, it is easier to use one of the state HFA programs if you need down payment assistance.  HFA lenders are able to do both your first mortgage and your down payment assistance at the same time.  Many of the HomeReady benefits above also apply to HomePossible.

 

HFA Preferred:  Fannie Mae’s HFA Preferred product enables eligible state Housing Finance Agencies (HFAs) to deliver loans up to 97% loan-to-value (LTV) ratio with low mortgage insurance (MI) coverage requirements.  HFA Preferred is ideal for borrowers with limited funds for down payment and closing costs and for those needing extra flexibilities on credit and income sources. It does not require a minimum contribution from the borrower’s own funds for one-unit properties but most HFA’s require between $500 and $1,000 dollars to be contributed by the borrower, or a gift from a family member to the borrower.  It is a 3% down first mortgage and can be used in conjunction with approved Down Payment Assistance programs for a maximum combined loan to value(CLTV) or 105%.

HFA Preferred Risk Sharing:  HFA preferred risk sharing is identical to the HFA preferred except that it does not have mortgage insurance and in most cases requires the borrower to have a 680 or higher credit score.  In almost all cases except if a borrower has a very higher credit score over 740.  This mortgage will give the lowest payment of all of the Affordable Conventional Mortgages as well as offering a lower payment than an FHA Mortgage.  The rate on an HFA Preferred Risk Sharing loan is slightly higher but the absence of mortgage insurance is a much greater reduction than the .5% higher rate so the borrower received the lowest monthly cost of mortgage.

HFA Advantage:  HFA Advantage is Freddie Mac’s Affordable Conventional Mortgage program.  It is a 3% down first mortgage and can be used in conjunction with approved Down Payment Assistance programs for a maximum combined loan to value(CLTV) or 105%.