Conventional Loans can be either conforming or nonconforming. Conforming loans are those that are for $417,000 or less and follow the lending guidelines set by Freddie Mac and Fannie Mae. Nonconforming loans, or jumbo loans, are those that exceed the maximum amounts set by Fannie Mae and Freddie Mac. The loans rates and amounts will depend on your credit score, income and minimum down payments.
Down Payment Options
Minimum Down Payment- Assuming a $300,000 loan
Private mortgage insurance or PMI is a type of insurance your lender will require you to obtain if your down payment is under 20% of the price of the home.
PMI fees can range anywhere from approximately .3% to 1.15% of the original loan amount, per year.
As of 2013, mortgage insurance is still tax-deductible!
It’s a good idea to keep track of your payments on the principal of your loan because when you reach 80% equity, or have paid off 20% of the principal, then you can cancel your PMI by notifying your lender. If you are considered a high-risk borrower then lenders may be able to require you keep the PMI until you have achieved 50% equity.