Key aspects of conventional loans:

Down Payment: Typically, conventional loans require a higher down payment compared to government-backed loans.  Down payment requirements can vary but often range from 3% to 20% of the home’s purchase price. However, a larger down payment can sometimes lead to better loan terms.

Credit Score: Generally, conventional loans have stricter credit score requirements compared to government-backed loans.  A good credit score is usually necessary to qualify for favorable interest rates.

Private Mortgage Insurance (PMI): If the down payment is less than 20% of the home’s value, lenders usually require borrowers to pay for private mortgage insurance. PMI protects the lender in case the borrower defaults on the loan. Once the borrower’s equity in the home reaches 20%, they can request to cancel the PMI.

Loan Limits: Conventional loans have loan limits set by Fannie Mae and Freddie Mac, which are the two government-sponsored enterprises that buy and sell mortgages. These limits dictate the maximum loan amount that can be considered a conventional loan. Loan limits vary by location and are updated annually.

Interest Rates: Interest rates for conventional loans can vary based on factors such as credit score, down payment, loan term, and market conditions.  They might be fixed-rate (the interest rate remains constant throughout the loan term) or adjustable-rate (the interest rate can change periodically).

Loan Terms: Conventional loans offer various loan term options, typically ranging from 10 to 30 years.

People often opt for conventional loans when they have good credit, a stable income, and a down payment ready.  These loans can offer flexibility in terms of loan amount, property type, and loan terms, but they do have higher qualification criteria compared to some government-backed loan programs.  Call (800) 804-5181 to speak with our Home Loan Specialists.