What is a Conventional Home Loan?
A conventional mortgage is a type of home loan that is not part of a government loan program, such as FHA, VA, or USDA. Conventional home loans are available at a fixed or adjustable rate, and conform to the loan limits set forth by Freddie Mac and Fannie Mae’s underwriting requirements. Conventional home loans are most popular with borrowers that are overall financially stable, who have good credit, can afford a sizable down payment, and have stable job and or income.
Conventional Home Loan Benefits
Conventional home loans which are available for new home purchases and refinancing, can sometimes be harder to qualify for because of credit and financial requirements. There are several benefits in choosing a conventional mortgage, which offer more flexible terms and fewer restrictions than government-backed loans.
Faster Home Loan Processing
Since the borrower deals directly with the lender, conventional loans have a shorter and less complicated approval process. They are typically simpler to apply and qualify for, with less paper work, and fewer rules and regulations to meet.
Avoid Mortgage Insurance Premiums
You’re more likely to avoid mortgage insurance premiums with conventional home loans, because they require higher down payments. With at least 20% down on a purchase, or 20% equity when refinancing, you will not be required to pay mortgage insurance.
Lower Mortgage Interest Rates
Conventional home loan terms are flexible and easier to customize to your financial situation and goals. Because the borrower is financially stable and has good credit, this type of loan gives you the ability to obtain a lower interest rate.
Compare Lender Fees
Conventional loans are offered through private lenders and fees are not set by the government. If you are considered a good credit risk because of income, credit score and other factors, private lenders have the power to compete for your business.