Find the Lowest Purchase Mortgage Rates in the Market
What is a Purchase Mortgage Loan?
A purchase mortgage loan falls under home loan category that is used to purchase a piece of property, whether it be a principal residence, a second home, or an investment property.
Who qualifies for a Purchase Mortgage Loan?
The good thing about purchase mortgage loans is that they generally come with the most flexible mortgage underwriting guidelines. In other words, you’ll be able to borrow the most amount of money at the highest loan-to-value ratio (LTV ratio) if the purpose of the loan is a home purchase. In addition, the credit score requirements for purchase mortgage loans are less rigorous than for other conventional home loans.
Types of Purchase Mortgage Loans
In the United States, a conforming loan is a mortgage loan that conforms to Fannie Mae and Freddie Mac guidelines. The most well-known guideline is the size of the loan, which as of 2017 was generally limited to $424,100 for single family homes in the continental US.
Reversely, a non-conforming mortgage is a term in the United States for a residential mortgage that does not conform to the loan purchasing guidelines set by Fannie Mae and Freddie Mac.
What is the difference between the two?
As previously indicated in their definitions, a huge difference between a conforming and a nonconforming loan is the loan’s limits. On a conforming loan, the loan limit varies by county. Anything above county limits is a jumbo loan, i.e. non-conforming loans.
What was also indicated in their definition is that these two types of loans have slightly different guidelines. Unlike conforming loans which are ruled by Fannie Mae and Freddie Mac guidelines, non-conforming loans have somewhat divergent guiding principles because of the higher loan limits and lesser probability of major investors purchasing these bigger loans.
Credit Score Requirements
While conforming loans can allow some wiggle room with your credit score, non-conforming loans have stricter credit qualifying criteria, with more scrutiny of your credit history and income.
Non-conforming loans generally come with higher mortgage interest rates than conforming loans because they carry a greater risk for a lender.
A minimum down payment for non-conforming loans are 20% or more. Unlike these jumbo loans, conforming loans usually offer lower down payments which makes them easier to qualify for.
Conventional Fixed Rate Mortgages (FRM)
A popular loan type, conventional fixed rate loans feature a constant interest rate for the life of the life. Generally speaking, monthly payments remain constant. Traditionally borrowers are expected to provide a 20 percent down payment though this is not necessarily required. Contact us for details on down payment requirements.
Available terms generally range from 10 years, 15 years, 30 years and 40 years.
Adjustable Rate Mortgages (ARM)
Adjustable rate mortgages are loans where the interest rate is recalculated on a yearly basis depending on market values. As interest rates are adjusted so is the borrower's monthly payment. While interest rates on ARM loans are generally lower than fixed rate loans they can eventually become higher.
Various types of ARM loans include Hybrid ARMs such as 10/1 year, 7/1 year, 5/1 year and 3/1 year programs.
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