WHY GO CONVENTIONAL?
When you begin to look into what you need to know before buying a home, you probably already know that you are making a huge investment. That’s why it’s so important to look closely at all the different mortgage options available to you before choosing one. On this page, we’ll be taking a closer look at conventional mortgage loans – what they are, who benefits from them and what the qualifications are – to help you decide if this is the best loan for you.
WHAT IS A CONVENTIONAL MORTGAGE LOAN?
A conventional mortgage loan, in short, is a home loan that is not insured or guaranteed by the federal government. Conventional loans can be used to purchase primary residences, second homes, and investment properties.
Conventional Mortgage Loans Can Be:
- Fixed or Adjustable-rate
- Conforming or Non-conforming
Conventional mortgage loans that are conforming follow the guidelines for loans that have been established by Fannie Mae and Freddie Mac. While these two entities are supported in part by the Federal Government, they are still privately owned and provide a secondary market for home mortgages. The factor that primarily determines if a mortgage is conforming is the amount of your loan.
BENEFITS OF A CONVENTIONAL MORTGAGE
Conventional mortgage loans can benefit borrowers in the following ways:
- More flexible lending options
- Saving on cost of mortgage insurance
- Possibility of financing home improvement costs into loan upfront
A conventional mortgage loan is typically a great option for those with good credit, a stable source of income and enough to pay a decent down payment.
HOW TO GET STARTED WITH A CONVENTIONAL MORTGAGE LOAN
The qualifications for a conventional loan are typically the following:
- Your monthly housing costs must meet a specific percentage of your total monthly income.
- Minimum down payment of at least 5-20% of the price in cash for a down payment and closing costs.
- FICO credit score of at least 620. Your credit score will also be a factor in the calculation of your interest rate.