Conventional Loans

What Are Conventional Home Loans?

A conventional loan is available in a variety of loan term options and is advantageous for those coming in with a strong down payment and good credit history. By far the most popular type of home loan, conventional home loans are loans that are not insured or guaranteed by any government program like the VA, USDA, or FHA.

Loan Program Details

  • 5% minimum down payment with Private Mortgage Insurance (PMI), OR
  • 20% minimum down payment without Private Mortgage Insurance
  • 3%-9% maximum seller contribution depending on down payment
  • Borrow up to 97% of a home’s value
  • Good+ credit and job history
  • Managed in-house
  • Simple & secure online application

What is the Difference Between Conforming and Nonconforming Loans?

Conventional loans can be deemed as either conforming and nonconforming. In a nutshell, conforming loans meet, or “conform” to, guidelines and loan size limits set by the Federal Government, while nonconforming loans do not.

Conforming loan limits are set each year by the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, the two main financial corporations that purchase mortgages from lenders. Conforming loan limits have a set baseline amount, however they may be higher depending on the county you live in and whether it has been designated as a “higher-cost” area. You can view the conforming loan limits for all counties in the US using the map here.

An example of a nonconforming loan is a jumbo loan. Jumbo loans (also called jumbo mortgages) are loans written for an amount that exceeds the conforming loan limits.

What are the 2020 Conventional Conforming Loan Limits for King County?

At the end of 2019, the baseline loan limit for King County for 2020 was raised to $741,750 for a single-family home.

Fixed-Rate Option

Under the fixed-rate option, your interest rate and monthly payment will remain the same, even if the market rates increase. This makes it the most popular loan as it offers the security of knowing exactly what your mortgage payment is for the entire length of your loan, which protects you from rising interest rates, no matter how high interest rates go.

Adjustable-Rate (ARM) Option

Adjustable-Rate Mortgage (ARM) options typically have lower initial interest rates than fixed-rate mortgages. The interest rate and monthly principal & interest (P&I) payments remain the same for an initial period of time (such as 5, 7, or 10 years), then adjusts to reflect market conditions up to a yearly and max rate cap limit – meaning your rate can rise (or fall) over time. This option may provide flexibility if you plan to move, pay off your loan or refinance before the initial rate adjusts.

If you’re interested in purchasing a home or refinancing in Washington, Oregon, or California, Homeseed can help you make it happen. Please contact us today or apply online in less than 10 minutes using the secure online application below.