What is a Conventional Loan?
Conventional loans boast great rates, lower costs, and home buying flexibility. They are the loan option of choice for about 60% of all mortgage applicants. Conventional loans are also known as conforming loans, since they conform to a set of standards set by Fannie Mae and Freddie Mac. The following are highlights of this program.
- You can use a conventional loan to buy a primary residence, second home, or rental property
- Conventional loans are available in fixed rates, adjustable rates (ARMs), and offer many loan terms usually from 10 to 30 years
- Down payments as low as 3%
- No monthly mortgage insurance with a down payment of at least 20%
- Lower mortgage insurance costs than FHA
- Mortgage insurance is cancelable when the home reaches 80% LTV
When is a Conventional Loan right for you?
If you have good credit and need a loan quickly, this is the loan for you. There are fewer restrictions on the loan itself, and there are fewer requirements for you to meet. Plus, a conventional loan is usually approved much faster than a government-backed loan. Also, you won’t necessarily need to purchase mortgage insurance, which can save you quite a bit of money in the long run. Another reason to consider a conventional loan is if you’re looking to purchase a condo.
Conventional loans are beneficial in a number of ways, which is why they can be challenging to qualify for – but if you do qualify, it is definitely something to consider seriously.
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