What makes the conventional mortgage a popular option for MA home buyers is the range of options it presents. A conventional loan can be either a conforming or non-conforming product depending on how it fits into Fannie Mae or Freddie Mac’s underwriting guidelines or loan limits.
Fixed: The payment is fixed for the duration of the loan.
ARM: Adjustable Rate Mortgage can be fixed for a variety of time periods before it goes adjustable. Some of the more popular products are the 3/1ARM, 5/1ARM, & the 7/1ARM. The first number is the length of time it is fixed for. The 1 is the amount of times the loan can adjust in a year once it moves to it’s adjustable period.
Interest Only: An IO loan, as its commonly referred to as, requires that the home owner only pay the interest on the loan. The actual loan balance does not decrease , like a traditional amortized loan. This loan is not recommended for most borrowers but can be beneficial to investors, or a borrower who gets paid in lump sums and is disciplined with their finances.
The conventional loan limits in MA are broken down by county just like they are for FHA
|County||1 Unit||2 Units||3 Units||4 Units|
- Wider variety of mortgage products
- Lower mortgage insurance rates than government loans
- Mortgage insurance can be rolled into the interest rate
- Loan be utilized for non-owner or investment properties
- Easier appraisal standards
- Can have multiple conventional loans at one time
- Tighter underwriting guidelines
- Less flexibility with DTI (debt to income ratio), & gifting down payment funds
- Lower loan limits
- Higher credit score requirements
- Higher down payment requirements