Conventional Mortgage

Conventional Mortgage

Conventional loans are a type of mortgage loan that is not insured or guaranteed by the government. They are offered by private lenders such as banks, credit unions, and mortgage companies. Conventional loans are a popular choice for new homebuyers who meet certain financial requirements.

Here are some key features and aspects of conventional loans for new homebuyers:

• Down Payment: Conventional loans typically require a higher down payment compared to government-backed loans. The down payment amount can vary but is commonly between 5% and 20% of the home’s purchase price. However, some lenders may offer programs that allow for down payments as low as 3% for qualified borrowers.
• Credit Requirements: Conventional loans generally have stricter credit score requirements compared to government-backed loans. Lenders typically look for a credit score of 620 or higher, but a higher credit score can improve your chances of securing a loan and obtaining better interest rates.
• Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home’s purchase price, you will likely be required to pay for private mortgage insurance. PMI protects the lender in case the borrower defaults on the loan. It is an additional cost that is added to your monthly mortgage payment.
• Loan Limits: Conventional loans have maximum loan limits set by the Federal Housing Finance Agency (FHFA). These limits vary depending on the location of the property and are adjusted annually. If you’re purchasing a home that exceeds the loan limits, you may need to consider other financing options.
• Interest Rates: Conventional loans offer a range of interest rate options, including fixed-rate and adjustable-rate mortgages (ARMs). A fixed-rate mortgage keeps the same interest rate throughout the loan term, providing stability in monthly payments. An ARM has an initial fixed-rate period followed by periodic adjustments based on market conditions.
• Loan Term: Conventional loans typically offer various loan term options, such as 15 years or 30 years. Shorter-term loans generally have higher monthly payments but result in less interest paid over the life of the loan.
• Flexibility: Conventional loans provide more flexibility in terms of property type. They can be used to finance primary residences, second homes, and investment properties, whereas some government-backed loans have restrictions on property types.

Contact us now so we can provide valuable guidance and help you navigate the process.