Conventional Home Loans in California
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What Are Conventional Home Loans?
A conventional home loan in California is a mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs). Conventional loans must follow guidelines set by organizations known as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). There are slight differences in guidelines between Fannie Mae and Freddie Mac.
Conforming Conventional California home loans:
- The maximum loan amount for this program is $726,200.
- A credit score helps determine the interest rate on a mortgage.
- You can avoid the Private mortgage Insurance requirement by putting down a minimum of 20% or more.
- You can put down as little as 3% of the home's purchase price. (private mortgage insurance required)
Jumbo Conventional loans:
- Loan amounts greater than $766,550 are available in California.
- Credit scores can affect an individual's ability to obtain certain types of loans.
- Jumbo loans are subject to stricter guidelines than those offered by Fannie Mae or Freddie Mac.
- Documentation requirements can be more extensive.
- You can finance your purchase with as little as 10% down.
- Many lenders require manual underwriting, which is the most stringent approach to underwriting today.
A few benefits of a Conventional Home Loan:
- A family member can gift the down payment and closing costs to a borrower.
- California conforming home loans have a loan limit of up to $726,200. (which is higher than an FHA Loan Limit)
- You can get a Conventional Home Loan in California with as little as 3% Down.
- Mortgage insurance may not be required for the entire term of your loan. Conventional loans allow the private mortgage insurance (PMI) to be dropped once the mortgage balance reaches either 80% of the current property value if the seasoning of the mortgage is greater than 5 years, or 75% of the current property value if the seasoning of the mortgage is between 3 and 5 years. The value must be supported with an appraisal.