A conventional loan or mortgage is a type of home buyer’s loan that is not backed by the government. These types of loans are only offered by private lenders like mortgage companies, credit unions, and banks. If they are backed by a government-sponsored entity, it is either by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
How Do Conventional Loans Work?
Because a conventional loan is not backed by a government agency, it is considered high-risk for the lender, as recovering the loan will be difficult if a borrower defaults. You will be required to pay a private mortgage insurance fee (PMI) on this type of loan if you are putting down less down 20% of the mortgage. In some cases, the lender may try to recoup the outstanding loan balance by selling the house through a foreclosure or short sale process.
Who Qualifies For A Conventional Loan?
To qualify for this type of loan, you must have established a good credit score. This will put you in solid financial standing. Generally, you are expected to have the following:
- Great credit score (at least 680)
- A good debt-to-income ratio (DTI between 36 to 43%)
- Down payment of at least 20%
Benefits of a Conventional Loan
A conventional loan has different features that make it quite popular and a great choice for different people. Some of the benefits of this type of loan include:
- Lower VA home interest rates
- Faster loan processing
- Different down payment options (as low as 3%)
- Varying term lengths
- Reduced private mortgage insurance
Interested In A Conventional Loan? Get In Touch With Us
A conventional loan offers flexibility and allows you to customize the loan in different ways, but there are some vital decisions you will have to make if you have decided to take this loan. This includes how much to pay as a down payment, the length of the loan term, the cost of the property, and so on. All of that may sound pretty overwhelming if you don’t have the knowledge and experience to navigate loans. Get in touch with The My Home Mortgage Team to discuss the terms of your conventional loan and all the packages we offer including loans for veterans and VA home loans.
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Testimonials
Patient & Helpful
Tammi was very patient and very helpful throughout the entire application process. Being a first-time home buyer I didn't know a lot of this which made me frustrated but I was able to get approved and now I am a homeowner thanks to Tammi!
— James C.
No Pressure or Stress!
Tammi Lewis made my home buying experience very easy. I felt no stress or pressure. Tammi was with me every step and made sure I understood everything with detailed talks. My credit score was low and Tammi advised me how to raise it. So that the Loan process would be approved with no problems. Any one know that wants to buy their first home I am recommending Tammi Lewis and First Home Mortgage.
— Charlie F.
Professional & Timely
Rob made sure my experience as a first time home buyer was smooth and painless. Very professional and got things done in a timely manner. Could not have asked for more!
— Samantha J.
Great Experience for a New Homeowner
Rob was at all times, willing to go over the numerous pages of information with me. I am a new homeowner and had many as this was my first time navigating the home-buying waters. He explained things to me in a way that I understood and got me all of my documents in a timely and efficient manner. I enjoyed working with him and would refer him to anyone who is looking.
— Erica F.