Conventional Loans in NH
A conventional loan in New Hampshire is your basic mortgage loan. It is a good program for home buyers with good credit and 5% or more for a down payment. As for most government programs, the money for conventional mortgage loans comes from Fannie Mae and Freddie Mac. Unlike FHA, VA, and RD loans, conventional loans are not government insured, backed, or guaranteed.
Here are some advantages of a conventional loan:
- No income limits.
- No purchase price limits.
- Flexible PMI (private mortgage insurance) programs for borrowers with less than a 20% down payment.
- Fixed and adjustable rate choices.
- Different term options, from 10-year to 30-year.
- No prepayment penalties.
- Seller concessions are allowed.
- Piggyback second mortgages are allowed.
Piggyback Mortgages (First and Second Combination Mortgages):
Let’s say you don’t have 20% to put down; you have only 10%. Here’s an example: How about we give you 90% financing, broken up into two separate loans? We might give you a fixed-rate mortgage for 80% of the purchase price and another 10% second mortgage to go with it. We call this a “piggyback” mortgage combination, and it can be structured many different ways. This isn’t a program for everyone. The second mortgage is usually at a higher rate than the first mortgage, and there are additional closing costs associated with the second mortgage. Still, if this helps you avoid the higher interest rate of jumbo financing, it can be a smokin’ hot deal!
There are some statements made about conventional loans that are not true.
Myth: You need to put 20% down to get a conventional loan.
Truth: In a perfect world, we would all have 20% to put down on a conventional loan, but it is not necessary. Even with as little as 5% down, you can get conventional financing. Here’s the bad news: With less than 20% down, you’ll have to pay PMI (private mortgage insurance).
Don’t let the notion of PMI upset or dissuade you from pursuing a home purchase. You’re a consumer – you don’t want to pay PMI. I get that! Still, you and I both want you to get the same low interest rate that a 20% down buyer is getting. The way to get that same low rate is to get the loan insured with a PMI company. The other option is to get piggyback financing.
Myth: PMI never goes away.
Truth: PMI can be temporary, depending on how it’s structured.
This is the most common form of PMI because it is pay-as-you-go. You pay the PMI with your monthly mortgage payment until such time as you have the necessary equity to eliminate it.
This is a one-time upfront fee (in the thousands of dollars). It results in a lower monthly payment than if you were paying the monthly PMI. In the long run, however, you can wind up paying more PMI than if you temporarily pay the PMI monthly.
Don’t believe it. It’s not really true. This is a program that is more accurately described as “lender-paid PMI.” The lender pays the PMI for you by charging you a higher interest rate. The payment is lower than the PMI monthly payment. Just remember, when you do finally get enough equity, there will be no reduction in the interest rate unless you refinance.
Please contact Charley at (603) 471-9300 or send an email to determine whether a conventional loan program is the right option for you.
We have originated more than 1/2 billion dollars of real estate loans to thousands of NH property owners and are happy to share our experience and expertise with you.