Conventional Loans
Learn About a Conventional Loan
A conventional loan is a type of mortgage that isn’t backed or insured by the federal government, unlike FHA, VA, or USDA loans. With this loan, the lender takes on the risk, and borrowers must meet specific eligibility and financial criteria. If you're considering purchasing a home, take a look at the information below to determine if a conventional loan could be a good fit for you.
What is a Conventional Loan?
A conventional loan is a mortgage provided by private lenders like banks, credit unions, and mortgage companies. Unlike government-backed loans, it is not insured or guaranteed by the government, meaning the lender takes on the risk. Conventional loans can be used to purchase or refinance a home or investment property. It's also important to note that there are two types of conventional loans: conforming and non-conforming loans.
Who is Eligible for a Conventional Loan?
To qualify for a conventional loan, you must meet specific criteria, including having a good credit score, stable income, and a low debt-to-income ratio. The exact requirements can vary depending on the type of conventional loan you're applying for. Generally, borrowers need a credit score of at least 620, though a higher score may be required. You’ll also need to provide proof of income, such as pay stubs, W-2 forms, and tax returns.
What are the Benefits of a Conventional Loan?
One of the key advantages of a conventional loan is that it allows you to borrow more money compared to government-backed loans, as there are no loan limits, unlike FHA loans, which have maximum limits based on your location. Additionally, conventional loans often offer lower interest rates than government-backed options, potentially saving you thousands over the life of the loan. Another benefit is that mortgage insurance isn't required if you put down at least 20% of the home's purchase price, which can save you hundreds of dollars in monthly payments.
What are the different types of Conventional Loans?
The most common type of conventional loan is a fixed-rate mortgage, which provides predictable monthly payments with a set interest rate for the entire duration of the loan. Another popular choice is the adjustable-rate mortgage (ARM), which starts with a lower interest rate that can fluctuate over time. Many borrowers also opt for jumbo loans, which are intended for higher-priced homes that exceed the limits of a standard conforming loan.
If you have any additional questions, be sure to contact (YOUR COMPANY NAME) to see if a conventional loan is the right choice for you.
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