• Conventional Loans

  • When it comes to shopping around for mortgages, conventional loans are a good option to look into for borrowers with good credit and a stable income. They do have stricter requirements than other loan types, however, if you qualify than a conventional loan can be a great tool to purchase your home. 

    What is a Conventional Loan?

    Conventional loans are mortgages that are not insured or guaranteed by the federal government. Unlike FHA or VA loans that are government insured, conventional mortgages are not which puts the lender at risk in case the borrower defaults on their loan. Because of this, lenders usually have stricter requirements for these loans. This makes conventional loans ideal for borrowers with good to excellent credit.

    Conventional loan limits vary from state to state (for example, in Los Angles the limit is $625,000). They often include a fixed rate or adjustable rate options for borrowers. A fixed-rate conventional loan comes with an interest rate that will not change over the life of your loan, usually between 10 and 30 years. In contrast, an adjustable-rate loan comes with a low introductory rate for a brief period of time which is followed by periodic adjustments. 

    Requirements

    Borrowers need to have good credit in order to advantage of low interest rates. Moreover, lenders typically require borrowers make a down payment on their home, usually around 20 percent of the loan amount. There are conventional loan options for those who cannot pay 20 percent down however the interest rate may not be as favorable and could require borrowers to pay for mortgage insurance- insurance that protects the lender in case a borrower defaults on their loan.

    Benefits

    Conventional loans are a great option for those borrowers who have a good credit history and value a stable mortgage with no surprises.  They often require less paperwork than their FHA and VA loan counterparts and offer low interest rates for those who qualify. 

    If you are interested in finding out if a conventional mortgage is right for you, please contact us or fill out our pre-approval form so one of our experienced loan officers can help you evaluate your loan options.