Conventional
What is a conventional loan and how do I qualify?
Conventional Loans
What is a Conventional Loan?
A conventional mortgage isĀ a home loan that’s not part of a government program. Some conventional mortgages are conforming. This means they meet the standards set by Freddie Mac and Fannie Mae. Some conventional mortgages require private mortgage insurance (PMI) if you make a down payment of less than 20%.
What Are the Advantages of a Conventional Loan?
There’s no right mortgage loan for everyone, so it’s important to know both the benefits and drawbacks of each of your options before you choose. Here are some of the benefits you’ll get from a conventional loan:
- Low costs:Ā A high credit score can help you qualify for a low interest rate. Plus, you can request to have the insurance requirement removed once your loan-to-value ratio reaches 80%. In contrast, the mortgage insurance premium that comes with anĀ FHA loanĀ may remain for the life of the loan, and the same goes for the guarantee fee on a USDA loan.
- Higher loan limits:Ā While conforming loans do have limits, you can go even higher with jumbo conventional loans if you need to. You may not get that kind of flexibility with government-insured loans.
- Flexibility for some:Ā Private mortgage lenders have more flexibility with conventional loans than they do with government-insured loans, primarily because they don’t need to follow the guidelines set by those government agencies.
- Low Costs
- Higher Loan Limits
- Flexibility
- In some cases no PMI
