Conventional loans are mortgages made by private lenders, such as mortgage companies, banks, and credit unions. You have no doubt heard about conventional loans as they are the leading option on the market representing some 70% of all home loans in the United States! There are two distinguishing attributes of conventional mortgage loans: they are not insured by a government agency, and the size of conventional loans cannot exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA).
While traditional conventional loans require a 20% down payment, there are now conventional loan programs that require as little as 3% down. Borrowers will need to pay for mortgage insurance until you reach 20% equity in the home. In terms of credit score, borrowers will generally need a FICO score of 680 or higher.
Conventional loan borrowers have the choice of opting for either adjustable-rate (ARM) or fixed-rate loans, depending on their plans for the property. While many folks prefer the reliability of a fixed rate that stays the same over the life of the loan, some will choose an adjustable rate if they want to take advantage of the lower rate and don’t plan on staying in the house long enough to be at risk of seeing their payment increase.
Borrowers who are refinancing also often choose conventional loans to save money compared to their existing mortgages. For example, FHA borrowers may transition to a conventional loan in order to eliminate mortgage insurance while getting a better rate.
Another key benefit of a conventional loan is its flexibility to be applied to many kinds of properties. Conventional loans can be used to finance a primary residence, a second home, or a rental property.
Why are conventional loans so popular? Borrowers gravitate to conventional loans because of lower interest rates, fast loan processing, diverse down payment options, varied term lengths on fixed-rate mortgage, and reduced private mortgage insurance.
Are you looking to take out a conventional loan? RLG has the tools and resources at its disposal to get you on your way and not waste a moment of your time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!