Fannie Mae / Freddie Mac

Conventional mortgages are loans that are not guaranteed or insured by any government agency, such as the Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). VA loans are designed for Veterans, active-duty military personnel, and, in some cases, their spouses and can have a lower down payment. As a part of the Department of Housing and Urban Development, the FHA insures residential mortgage loans made by private lenders, like Sunshine Financial Group.

Conventional mortgages loans adhere to Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) guidelines and can be conforming or non-conforming. Fannie Mae is a corporation created by the federal government that buys and sells conventional mortgages. It sets the maximum loan amount and requirements for borrowers. Chartered by Congress in 1970, Freddie Mac was established to strengthen and support the country’s residential mortgage market and provide more opportunities for homeownership.

Typically, conventional mortgages have fixed terms and rates. We have many different terms of fixed-rate loans available. With this type of conventional mortgage, the interest rate is fixed for the term of the loan. Another common feature of a conventional mortgage is for the borrower to provide an amount for the down payment.

These types of loans provide wonderful home financing options for borrowers with reserves for a down payment. Because of this larger percentage down, conventional mortgages can provide better interest rates than non-conventional mortgages. However, homebuyers still have mortgage options even if they may not have access to the larger down payment amount. With a lower down payment amount and a potentially higher interest rate, non-conventional mortgages such as an FHA or VA loan might be a better option.

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