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Conventional Loans

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Conventional Loans

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30 Year Fixed

A 30 year fixed conventional loan is a loan that has the same mortgage payments for 360 months.
Conventional loans typically are harder to qualify for than FHA loans and require a slightly higher down payment. However, in some cases rates can be lower and have lower closing costs. Also, monthly mortgage insurance is usually less or can be nothing with 20% down payment.


20 Year Fixed

This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 240 months as opposed to 360 months. Since the loan is being paid slightly faster than the 30 year fixed rate loan, monthly payments for this type of loan are higher than the 30 year fixed rate loan. Some Lenders allow for a lesser rate.


15 Year Fixed

This type of loan is the same as the 30 year fixed rate loan except the life of the loan is 180 months as opposed to 360 months. Since the loan is being paid faster than either the 30 year fixed rate loan or the 20 year fixed rate loan, monthly payments for this type loan are higher than the other two loans. Generally, the longer a lender agrees to keep the interest rate "fixed," the greater the risk to the lender, therefore, in most instances, interest rates on 15 year fixed rate loans are slightly lower than on 20 or 30 year fixed rate loans.


  • 5% down payment required on purchase

  • Minimum credit score - usually 620

  • Post- bankruptcy: can qualify after 4 years

  • Post-foreclosure: can qualify after 7 years

  • Post-shortsale: Can Qualify after 2 years (LTV restrictions may apply)


3/1, 5/1, 7/1 ARM

This type of loan has monthly payments that are based on a 30 year repayment schedule and the interest rate remains fixed for the first three years. After that time the interest rate (monthly payments) may change year after. This is called the "adjustment period."

The new rate is based upon changes in a financial index and is calculated by adding a specified amount to the index. The amount that is added to the index is called the margin. Let's say the index equals 4.5% at the time of adjustment and the margin equals 2.50%, the new interest rate would be 7%. However, adjustable loans usually have an "adjustment cap." So if the adjustment cap is 2%, the new rate would be 6.5%.

There is also a lifetime cap which limits how much the rate can go up or down during the life of the loan. These loans can work out well for people who stay in their house for the short term.

5/1 ARM is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first five years.

7/1 ARM is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first five years.





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