Is a Conventional Mortgage Right For Me?
What are Conventional Loans?
Conventional Loans are mortgage loans not insured by the government (like FHA, VA, and USDA), but they typically meet the lending guidelines Fannie Mae or Freddie Mac has set. Typically, conventional loans have better rates, terms, and lower fees than other loans. However, conventional loans usually require a borrower to have good-to-excellent credit (620 Credit Score), reasonable monthly debt obligations, a 3-20% down payment, and reliable monthly income.
Most Common Types of Conventional Loans
Fixed Rate Mortgages: Your rate and payment never change.
- 30 Year Fixed Loan
Benefits: Lowest fixed monthly payments - 20 Year Fixed Loan
Benefits: Low fixed monthly payments - 15 Year Fixed Loan
Benefits: Lower rate than the 30 or 20 Year Fixed Loans; Pay less interest and pay your home off more quickly. - 10 Year Fixed Loan
Benefits: Lower rate; Pay off your loan and build equity faster. - 5 Year Fixed Loan
Benefits: Lowest rate; Pay off your loan and build equity the fastest
Adjustable Rate Mortgages: Your interest rate can change once a year after the initial period.
- 3/1 ARM
Fixed Rate for 3 Years, Adjustable Rate for the remaining 27 years - 5/1 ARM
Fixed Rate for 5 Years, Adjustable Rate for the remaining 25 years - 7/1 ARM
Fixed Rate for 7 Years, Adjustable Rate for the remaining 23 years
What are the Conventional Down Payment Requirements?
For purchase transactions, conventional loans require the home buyer to put down at least 5% -20 % of the home's purchase price. For a Refinance transaction, most lenders require at least 10% equity in the property.
What types of property are eligible?
Most conventional loan programs allow you to purchase single-family homes, warrantable condos, planned unit developments, and 1-4-family residences. A conventional loan can also finance a primary residence, second home, and investment property.
