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Angie Faron, Keller Williams InfinityPhone: (815) 351-0689
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What you need to know about conventional mortgages

by Angie Faron 09/12/2022

Conventional mortgages are the most popular form of home financing for buyers in the United States. However, it may not always be clear how these loans differ from other loans, such as those provided by government agencies. To help you gain a better understanding of conventional loan basics, here is a quick guide with further information:

The best way to qualify for a conventional loan

When obtaining conventional financing, your lender will examine your financial situation. The loan officer may request information including your credit score, income statements and debt to income ratios.

A down payment is required for conventional loans. Each lender has different minimum requirements, but the larger the down payment, the less money you’ll have to pay back over time.

Minimum required down payments

Many believe a 20% down payment is required for conventional loans, but the minimum requirement is typically much lower. You can find mortgages with minimum down payment requirements anywhere from 3% to 20% of the overall purchase price. 

Your choice of down payment amount can affect the terms of your mortgage, like interest rate or the need for private mortgage insurance.

Conventional loan vs a government loan

Government-backed home loans have specific features to suit some homebuyers. 

The Federal Housing Administration (FHA) is a government institution offering home loans for buyers who meet certain qualifications. Government-backed loans have advantages for those with bad credit or other financial roadblocks, but require other qualifications for approval.

Interest rates

Conventional mortgages tend to have higher interest rates than FHA loans, although these loans typically require borrowers to pay mortgage-insurance premiums. 

Interest rates charged on a conventional mortgage vary by several factors, including the term and amount borrowed. However, interest rates are also subject to change every year based on the overall economy. Many buyers choose to wait for a period when interest rates are lower to apply for a mortgage, regardless of the loan type.

Ultimately, your choice of loan will depend on your personal circumstances. The more you know about different types of mortgage, the better equipped you’ll be for your journey into thefinancial real estate marketplace.

About the Author
Author

Angie Faron

I have been a Full-Time Realtor since 1997.  Your complete satisfaction is my number one priority!  I love what I do and I thing that will quickly become apparent to you.  I thrive on meeting new people and making a plan to best help you fulfill your goals! There is a lot to navigate through to help you sell your home or find your dream home.  I pride myself on using the most current technology available to make the home buying and selling processes as easy and seamless as possible. I like networking with other top real estate professionals to continually improve the service I provide and I enjoy researching new ways to integrate the latest in technology with my action plan for both buyers and sellers.  And, education plays a major role in advancing myself professionally and servicing you!