Conventional Loans

Conventional Loans

It is a fact: Conventional loans are a popular choice for borrowers who have good credit and can afford a down payment. These mortgages are not backed by a government agency such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA). Instead, they are typically offered by private lenders and have stricter requirements such as a credit score of at least 620. However, they are widely available, meaning you’ll have options when choosing a mortgage lender 1.

Here are some points to consider when a Conventional loan makes sense:

• Good credit score: Conventional loans are ideal for borrowers who have a good credit score of at least 660 or higher. A higher credit score can help you get a better interest rate and lower mortgage insurance. 1 .
• Down payment: Conventional loans require a down payment of at least 3% of the purchase price. However, if you can afford a larger down payment, it can help you avoid private mortgage insurance (PMI) and reduce your monthly payments 1 .
• Flexibility: Conventional loans offer more flexibility than government-backed loans. For example, you can use a conventional loan to buy a second home or an investment property 1.
• No upfront mortgage insurance: Unlike FHA loans, conventional loans do not require upfront mortgage insurance. This can save you thousands of dollars in closing costs 1.
• No mortgage insurance with 20% down payment: If you can afford a down payment of 20% or more, you can avoid paying private mortgage insurance (PMI) 1.
• Higher loan limits: Conventional loans have higher loan limits than government-backed loans. In most areas, the loan limit for a conventional loan is $766,550. 1.