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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? 

Give us a call!  One of our mortgage specialists would be happy to answer all of your questions and get you started with a great low rate today.

 

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!!!
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