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Have you ever heard of ‘conventional loans’? They’re a common form of mortgage product that buyers across Idaho use to finance a home purchase. They aren’t government-backed loans, unlike other loan products like FHA loans.
A conventional home loan can be defined as a mortgage that is not insured by the government. Instead, it is originated from private lenders. This is the distinguishing factor between conventional mortgages and those that are guaranteed by the government, like FHA or VA loans.
Conventional home loans in Idaho are the more popular forms of mortgages in the state, as well as across the entire nation. These loan products typically meet down payment and credit criteria established by Fannie Mae and Freddie Mac. They also conform to loan limits established by the Federal Housing Finance Administration (FHFA).
Generally speaking, applicants of conventional loans need a minimum credit score of 620 to qualify, though higher scores will ensure a lower mortgage interest rate.
The minimum down payment requirement for conventional loans is 3%, depending on your financial profile. That said, if your credit score and income is on the lower end of the spectrum, you may be required to make a higher down payment.
As mentioned, the biggest difference between conventional loans and a mortgage product like an FHA loan is that conventional loans are not backed by the government, while FHA loans are. Lenders who issue government-backed loans like FHA loans are insured so that if the borrower defaults on the loan, the lender will be protected by the insurance that comes with government-backed loans.
Since conventional loans are not backed by the government, they don’t come with the same type of insurance. As such, they are considered riskier for lenders. That’s why the requirements to get approved for a conventional loan in Idaho tend to be stricter than for FHA loans. You’ll need a stronger credit score or income to qualify for a conventional loan compared to an FHA loan, for instance.
That said, lenders will work with different borrowers who are applying for a conventional loan to help them get the best terms and rates possible.
There are some advantages to conventional home loans in Idaho, and perhaps the biggest perk has to do with mortgage insurance.
Home buyers in Idaho who take out FHA loans to buy a home usually have to pay mortgage insurance, which protects the lender in case the borrower defaults on the mortgage. This mortgage insurance requires an upfront premium paid by the borrower, which equates to 1.75% of the base loan amount. In addition, an annual premium will also need to be paid, which comes to 0.98% for the majority of buyers who use an FHA loan.
Conventional loans in Idaho sometimes need private mortgage insurance (PMI), depending on the size of the down payment. More specifically, a 20% minimum down payment is required in order to avoid paying PMI. If the down payment amount is under 20% of the purchase price of the home, then PMI would apply.
So, while FHA loans require mortgage insurance, conventional mortgages give buyers a chance to avoid having to pay mortgage insurance if they can come up with at least a 20% down payment.
This is part of the reason why conventional loans are so popular in Idaho and the rest of the nation, as many qualified borrowers may want to do what they can to avoid having to make extra payments in the form of mortgage insurance.
Idaho conventional mortgages have size limits, which are known as “loan limits” and are set by the FHFA. These loan limits vary by county. Mortgages that fall within these limits can be sold to Fannie Mae and Freddie Mac, which are government-controlled entities that work within the secondary mortgage market.
Conventional loans that conform to these loan limits are known as “conforming” loans. If loans are higher than these limits, they’re known as “jumbo” loans.
In the state of Idaho, conforming loan limits for 2021 range from $548,250 in most counties, up to $822,375 in the most expensive county. These figures apply to single-family homes. Properties with 2, 3, or 4 units have a different set of loan limits.
Here are the 2021 conforming loan limits for all ID counties.
It should be noted that Idaho home buyers can borrow more than these loan limits. However, their income and down payment will need to be sufficient enough to support these higher loan amounts because of the higher risk associated with them. In this case, the loan would be considered a jumbo or non-conforming loan.
Check out our mortgage loan limit tool for conventional, FHA, and VA loans.
Recap: Idaho conventional home loans can either be conforming or jumbo loans. The type of loan will detail the amount being borrowed compared to the conforming limits in the respective county that the home is located in.
Since 1992, Sammamish Mortgage has been helping countless buyers secure the mortgage products they need to help finance such a large purchase. With various mortgage programs offered, we are the number on mortgage resource for borrowers in Idaho, and the rest of the Pacific Northwest region, including Washington, Colorado, and Oregon. We are a family-run business and work hard to help borrowers realize their dreams of owning a home. Contact us today if you have questions about applying for a mortgage.
Looking to buy a home? Find out what you need to know about conventional home loans in Boise, ID and check out our loan limits tool.
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