With the vast array of mortgage products on the market, as a potential homebuyer you may be asking yourself: “which one is right for me?” The tried-and-true conventional loan is a great mortgage to consider depending on your current financial and credit situation and your homeownership goals.
On top of the ability to choose a loan term and an adjustable or fixed interest rate, conventional mortgages differ from government insured loans in regards to requirements of the borrower, including:
- Down payment. Conventional borrowers must put down a minimum of 3 percent of their purchase price, which can be entirely gifted from a relative.
- Interest rate. Interest rates vary for conventional borrowers based on credit score and loan term.
- Mortgage insurance. If a borrower has less than a 20 percent down payment, they will be required to pay mortgage insurance. Mortgage insurance premiums vary based on down payment amounts but are only monthly or single premiums; FHA loans require upfront and monthly mortgage insurance premiums.
- Closing costs. Unlike a government-insured USDA loan, conventional mortgage closing costs must be paid at settlement and cannot be rolled into the mortgage.
- Types of purchase. Unlike most government-insured loans, conventional mortgages can be used for investment property and second homes.
Conventional mortgages are a great option for borrowers with good credit and financial reserves for a down payment of 5 percent or more. Mortgages are not a one-size-fits-all product. To determine if a conventional loan may be the right mortgage for you, speak with one of our mortgage bankers.
Looking for more information on homebuying? Our Mortgage 101 Handbook is the ultimate guide for first-time homebuyers.
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