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Acceptance Capital Mortgage Corporation
Conventional Loan
A conventional mortgage is not backed or insured by a government agency, such as, the Federal Housing Administration (FHA) or the Veterans Administration (VA). They are usually securitized by Fannie Mae or Freddie Mac. These two GSE’s (government sponsored entities) operate as hybrid entities that are private corporations sponsored by the federal government.

The down payment of a conventional loan is generally higher than that of a government-insured loan, such as an FHA loan, which is 3.5% and VA which does not require down-payment or mortgage insurance. Conventional borrowers must put down at least 5% of a home’s purchase price for a down payment. Conventional mortgages do not contain pre-payment penalty clauses and are available in a wide variety of fixed rate programs for 10, 15, 20 and 30 years.

The most commonly chosen conventional loans are fixed for 15 or 30 years. Conventional loans require mortgage insurance and escrow impounds for loans that exceed 80% loan to value. Borrowers with exceptional credit may be able to avoid mortgage insurance with loan to value ratios above 80% by having the lender pay a single up front premium.