Conventional Loans
A conventional mortgage is one that is not guaranteed or insured by the federal government.
A conventional loan can be either a conforming or non-conforming loan. Most conventional loans are conforming.
- Conforming loan – meets the requirements to be sold to Fannie Mae or Freddie Mac
- Non-conforming loan – does not meet the requirements to be sold to Fannie Mae or Freddie Mac. A jumbo loan is an example of a non-conforming loan because it exceeds the conforming loan limits.
Conventional Loan Highlights
- Have stricter credit requirements than FHA loans
- Have a higher down payment requirement than government backed loans (in most scenarios)
- Once 20% equity is reached on the loan, private mortgage insurance (“PMI”) is not required.
- Are available in all areas of the country
- There is no maximum income ceiling disqualifier
- Conventional loan interest rates are typically higher than a VA loan and lower than an FHA loan
The PROs and CONs of a Conventional Loan
- PROs
- Low Interest Rates – loan interest rates are associated with a borrower’s creditworthiness (including a high credit score), which can result in lower rates.
- Higher Loan Limits – loan limits are higher with conventional loans and are even higher with non-conforming conventional loans.
- Flexibility – private lenders have more flexibility (credit score, down payment requirements and term lengths) than government issued loans and hence there is a high likelihood that more options exist.
- CONs
- Higher Credit Score Requirements – a higher credit score is required for a conventional loan versus an FHA loan.
- Higher Down Payment Requirements – a conventional loan most likely will require a slightly higher minimum down payment than what is required with government backed loans.
- Stricter Qualifying Requirements – a conventional loan focuses on a borrower’s personal financial situation which may be more closely scrutinized because the lender is taking more risk on the loan versus a loan that meets government agency’s eligibility requirements.
Got questions?
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Working with MC Mortgage Group
- We put YOU first. We are committed to getting every client the very best possible deal every single time.
- MC Mortgage Group offers some of the most competitive rates in the Nation!
- Fast and efficient. We close most of our loans in 30 days or less.
- We offer a variety of loans. MC Mortgage will find you the loan that is right for you!!!