Overview: Conventional Loans
Better Rates & Refreshingly Flexible
A conventional loan is a type of mortgage that is not guaranteed or insured by any government agency, including the Federal Housing Administration (FHA), Department of Agriculture (USDA) and the Department of Veterans Affairs (VA) and is typically fixed in its terms and rate.
However, conventional loans are commonly interchangeable with ‘conforming loans’, since they are required to conform to Fannie Mae and Freddie Mac’s underwriting requirements and loan limits.
The main benefits of a convention loan are:
ARM VS. fixed: Which should I choose?
An adjustable-rate mortgage, commonly referred to as an 'ARM', is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. In general, the initial interest rate is lower than that of a fixed-rate mortgage. After the fixed-rate period ends, the interest rate on an ARM loan moves based on the index it’s tied to.
When deciding if a fixed or ARM rate is right for you, there are some questions that you need to ask yourself:
How do I qualify for a Conventional Loan?
Conventional mortgage borrowers typically make larger down payments than FHA borrowers, and they tend to have a more secure financial standing and are less likely to default. A larger down payment means lower monthly payments. Plus, with the ever-increasing mortgage insurance premiums on FHA loans, payments for conventional loans that don’t require private mortgage insurance can be much more manageable in comparison.
The major eligibility requirements include: