In the search for a home mortgage, you'll come across what often feels like a completely new and perplexing language. You'll hear phrases like "conforming loan programs," "private mortgage insurance," "mortgage insurance premiums," "fixed-rate mortgage," "adjustable-rate mortgage," and more.
If you don't know the lingo, it can be a bit overwhelming and even more difficult to identify which mortgage is the right choice for you. Luckily, this guide will help explain one of these mortgage options. When repaying your loan, conforming loan programs can help you save a lot of money over time. These are some of the benefits conforming loan programs have to offer.
Lower Down Payments Possible
The average expected down payment for non-conforming loan programs is 20 percent. People who choose conforming loans, or Fannie Mae or Freddie Mac loans, can pay considerably less as a down payment.
You may be able to pay as little as three percent down. That is a huge benefit for cash-strapped buyers and families who struggle to save large sums of money for a down payment.
Greater Access for People with Less than Perfect Credit
The other benefit of using conforming loan programs for your mortgage is that many of these lenders are willing to work with people who have bruised credit. In fact, it is far easier for people with less than perfect credit scores to still obtain mortgage loans through conforming lending options than with non-conforming lenders.
The relaxed lending requirements are instrumental for improving homeownership rates in poorer communities and the benefits that higher homeownership rates provide to the community (lower crime rates, the pride of ownership, greater civic activity, and increased volunteerism).
The Possibility of Lower Interest Rates
Conforming loan programs were designed to make homeownership more accessible to lower-income families. The idea was to make homeownership available to all and not something limited to the wealthy. In addition to lower down payments, the program often offers lower interest rates than other loans available.
This means you'll pay considerably less, over a standard 30-year mortgage period, to own your home. For instance, reducing your interest rate by a single percentage point can save you $30,000 total on a $160,000 mortgage, reducing the costs of owning your home significantly.
Buying a home isn't something you do every day. Learning the lingo and understanding a few key concepts, like the advantages of conforming loan programs, can help you make savvy home-buying decisions that will save you thousands of dollars over the life of your mortgage loan.
To learn more about conforming loan programs, contact a financial advisor near you.
Share14 May 2020
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