What is a Conventional Mortgage?

If you are currently in the market for a new home you probably have already started doing research on the different types of mortgages. Whether you have a large amount to put down or just a little bit saved up there are always options. Let’s see if the conventional mortgage is right for you.

A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. It may have a fixed or adjustable rate.  These loans are offered by private entities such as banks, credit unions, private lenders and savings institutions. This is why conventional loans are only given to those in good financial standing.

The terms of a conventional loan are usually 15, 20 or 30 years. If you want to obtain a conventional loan you will need to have a larger down payment than for an FHA loan.

A conventional mortgage is ideal for the borrower with good to excellent credit. In addition to requiring higher credit scores, there are minimum down payments and lower debt-to income ratios required to qualify. However, conventional mortgages generally have fewer hurdles than FHA and VA loans and are usually processed faster.

So to recap, if you have excellent credit score, your debt-to-income ratio is low and can contribute up to 20% of the cost of the home towards a down payment then you are a candidate for a conventional loan. It is always important to talk to your mortgage lender about your options and what loan would be best for your unique situation. If you would like to talk to someone further about the different loan options, contact us here!