First of all, let us introduce you to what exactly is a Conventional Loan.
Any house loan that isn’t regulated by a federal government agency like the Department of Veterans Affairs, the Department of Agriculture, or the Federal Housing Administration is referred to as a conventional mortgage. Private mortgage lenders, which include credit unions, banks, and other financial institutions, are the ones who originate and service these loans.
You’re probably applying for a conventional mortgage if you’re looking for a loan that isn’t guaranteed by a federal agency.
Despite the fact that conventional loans are not insured or guaranteed by the government, they must adhere to the rules set forth by Fannie Mae and Freddie Mac, two huge publicly listed businesses (agencies) created by Congress to purchase loans made by lenders.
Categories of Conventional Loan
A Conventional Loan falls under two categories that are:
- Conforming and
A conforming loan is one that can be acquired by Fannie Mae or Freddie Mac. It’s a nonconforming loan otherwise. Nonconforming loans must meet criteria set by individual lenders, whereas conforming loans must follow guidelines set by the whole mortgage industry.
Are Conventional Loans the Best Option for You?
So, which loan is the greatest fit for you? Is it better to have a government-backed assurance or to go with the flow? Because conventional loans have fewer constraints than government-backed loans, lenders may be able to give their customers more flexible terms, features, and advantages.
Conventional loans have various advantages, including:
- Down Payment reduced to 3%
- There is no need for upfront mortgage insurance.
- Loans are processed more quickly.
- Higher interest rates are possible with better credit scores as compared to government-backed mortgages.
- Appraisal and property standards are less stringent than for FHA loan, VA, or USDA loans.
- The duration of a term might range from ten to thirty years.
The bottom line:
If you’re still confused about whether you should opt for a Conventional loan or not, then it is better to take an expert’s advice. At San Antonio Mortgage LLC, We’d be pleased to answer any questions you have regarding financing your next home.