Dallas Conventional Mortgage
Conventional Mortgage FAQs
Dallas Conventional Loans
What is a conventional mortgage in Dallas?
A conventional mortgage is a home financing option in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. They can be either fixed-rate or adjustable rate mortgages. Conventional home loans are not uncommon. In fact, approximately 35-50% of mortgages are conventional.
How is a conventional mortgage different than the other Dallas mortgage loans?
Perhaps the biggest difference between a conventional mortgage and the other types of home financing options is the fact a conventional loan is not made by a government entity nor insured by a government entity. We refer to conventional mortgages as non-GSE loans, or non-government sponsored entity loans.
What are the advantages of a conventional mortgage?
While government-insured home loans are attractive because of their low or no down payment requirements, conventional mortgages also have their advantages including:
- No upfront mortgage insurance payment*
- Private mortgage insurance can be removed as soon as the loan amount has reached 80 percent of the sales price*
- Lower cost borrowing option
What is the difference between a “conforming” and “nonconforming” conventional home loan?
Conventional mortgages are “conforming” if their amount is $417,000 or less for a single-family home. If the conventional mortgage is above the loan limit set by Fannie Mae and Freddie Mac, it is considered a jumbo loan and is a “nonconforming” conventional mortgage.
What is the difference between a fixed-rate conventional mortgage and an adjustable-rate conventional mortgage?
A fixed-rate conventional mortgage is the more common option of the two. Borrowers who opt for a fixed-rate mortgage are locked in to a set interest rate, which results in never-changing monthly mortgage payments for the duration of the loan term. Most fixed interest rate conventional mortgages have a 15 or 30-year term. The main advantage of a fixed-rate mortgage is inflation protection. A fixed-rate convention mortgage states that even if the market mortgage rate increases in the future, your mortgage rate has been locked in and will not change.
An adjustable-rate conventional mortgage, or ARM, is a home loan with an interest rate that could change throughout the duration of the loan term. Although an ARM may begin with lower monthly payments than a fixed-rate mortgage, keep in mind that:
- Your monthly payments may increase over time
- Your monthly payments can increase even without an increase in the interest rate
- There is a possibility your payments will not drop even if interest rates drop
- If you try to pay the loan off early, you may incur a penalty
To determine the best mortgage program and term for your personal situation, please contact our experienced Dallas mortgage experts at (512) 524-8077 or by filling out a form located on the right side of the page.
*Statement based on loan amount of $175,000, 360-month loan term, 4.5% Dallas mortgage rate and 4.5972% Annual Percentage Rate.