What is a Conventional Mortgage Loan?
A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. In contrast, an FHA mortgage loan is insured by the Federal Housing Authority and VA mortgage loans are backed by the Department of Veterans Affairs. Conventional loans can be either fixed or an adjustable rate.
Typical Requirements of Conventional Mortgage Loan
Conventional loans typically require a higher down payment than government loans. For consumers with a substantial down payment, equally or exceeding 20% of the purchase price of a home, private mortgage insurance (PMI) is not typically required.
Conventional loans are more beneficial to borrowers with higher credit scores. Borrowers with lower credit scores will typically face higher interest rates. In addition, borrowers with recent foreclosures or bankruptcies may not immediately qualify for a conventional mortgage loan.
Is a Conventional Mortgage Loan Better?
To determine which type of loan best suits your circumstances, you must take some time to consider the pros and cons of each. Conventional loans are typically more appropriate for individuals with higher credit scores and substantial down payment funds. Government loans typically have lower minimum credit scores and lower down payment requirements. But there is more to it than that…
My best advice is to contact me for a consultation. I will assess your financial situation and provide a recommendation that is most appropriate for your unique situation. I can explain the pro’s and con’s of conventional financing and provide you with additional financing options including VA, USDA, and FHAmortgage loans.