Conventional Loan
A conventional loan is ideal for those who make larger down payments and have a stronger credit profile. Unlike government backed loans (FHA,VA,USDA), conventional loans are not insured by government agencies. So they conform to underwriting guidelines set forth by Fannie Mae and Freddie Mac. Therefore, you will find that the higher the credit score, the lower the interest rate. Times have changed, so this isn’t your 1980’s conventional loan. You don’t need 20% down. In fact, this is a big misconception about conventional loans.
Many recent changes have expanded the available pool of mortgages to buyers through conventional loans.Bear in mind, if you are buying an investment property you will need a conventional loan. Sometimes condos (unless FHA/VA approved) require that you buy using a conventional loan as well.
Cool Tidbits About Conventional Loans
- Fixed and adjustable rate terms
- Down payments can be gifted
- Private Mortgage Insurance (PMI) can be avoided (ask about this)
- Standard down payment starts at 5% down
- 3% Down payment options available
- Lender independently approves condo units
- Second mortgages can be taken to avoid the need for PMI
- Buy a 2-4 Unit Property, while living in one-unit
- Finance renovation costs at the time of purchase or refinance
5 Advantages Of A Conventional Loan:
- Interest rates can get better as your score climbs from 680-740 ~ Other variables play into consideration, but score does matter with a conventional loan
- Those who don’t plan on staying put, may want to consider an adjustable rate mortgage (A.R.M) to align their financial strategy to the time they’ll own the loan.
- Private Mortgage Insurance (PMI) monthly cost typically goes down as you put larger down payments(3%,5%,10%,15%,20%). Other variables such as score and debt ratios can impact this as well.
- Private Mortgage Insurance (PMI) can be removed without refinancing your home. Although, there are time, payment history, and equity considerations still at play.
- Non-conforming options exist for those who need to borrow more money. Typically referred to as Jumbo loans.
Conventional loans or an FHA loan ?
For many this is an ambiguous question when they start the process of getting pre-approved to buy a home. What factors make conventional loans better for one than an FHA loan would be? When does FHA apply better to someone compared to a conventional loan? How are the two loans different? How is mortgage insurance different between the two loan types? Which of the loan types allows higher debt ratios? Which is more forgiving on credit? For some basic information on a comparison, check out this blog
Why choose Mortgage Maestro Group for your conventional loan?
The Mortgage Maestro Group is a locally operated mortgage bank with years of experience. We have helped thousands of homeowners navigate the seas of conventional loan options. Our guiding light is that.we work with honesty and integrity every step of the way. Don’t just take our word for it, check Google here. When it comes to conventional loans aligning with the right structure and strategy can help you avoid costly borrower mistakes. Make sure you are working with a lender that explains and educates you on the options available to you.