What Is a Conventional Loan?


When you apply for a mortgage, there’s a lot to learn. I’m here to help you make sense of it all. A conventional loan is another name for a standard mortgage issued by a bank.

A conventional mortgage isn’t insured by the federal government. Agencies that guarantee home loans include the Federal Housing Administration (FHA), the U.S. Department of Veteran Affairs (VA) or the U.S. Department of Agriculture (USDA).

Conventional loans offer fewer restrictions and more flexible terms than those backed by the government. However, without government guarantees, buyers don’t get a break on their down payment. For those who have solid credit, the ability to put money down and a reliable income, a conventional mortgage has these advantages:

  • 3% minimum down payment
  • Options for mortgage insurance
  • Lower interest rates for those with a good credit history
  • Low number of fees and penalties
  • Flexible loan terms
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Which Type of Conventional Loan Should You Choose?


Conventional loans come in several variations. As I get to know you, I’ll recommend the best loan for your situation. Here are some of the choices:

Adjustable-Rate Mortgage

An adjustable-rate mortgage (ARM) offers terms that change over time. This type of loan has an initial period with a fixed rate. After the introductory period, the rate changes according to fluctuations in the market. With an adjustable rate, your monthly payments can vary. An ARM may be right for you if current interest rates are high, or if you think you’ll be moving to a new home in a few years.

Fixed-Rate Mortgage

Fixed rate mortgages are often best for those who plan to stay in their house for a long time. With a fixed-rate mortgage, you’ll always know your monthly payments because your interest rate is locked in for the term of the loan. Standard terms are 10, 15, 20, 25 and 30 years. With a longer term, monthly payments are lower. With shorter terms, payments are higher, and you build equity quickly. Use your equity for future transactions, such as a cash-out refinance or a down payment on your next home.

Jumbo Mortgage

A jumbo loan is for an amount above the conforming limit established by the Federal Housing Finance Agency. Also called a non-conforming mortgage, these loans are for those who are buying an expensive home. In most area of the U.S., the conforming loan limit is $424,100 but can be as much as $636,150 in high-cost places. To qualify for a jumbo loan, you’ll need an excellent credit score and a low debt-to-income ratio.

Contact me for more information about conventional loans.


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