You shouldn’t worry though, we’re a local mortgage lender here in Midland, Texas, so you don’t have to worry about being on hold with a national lender. Just stop by our local office if you have a question or would like to chat.
As there is quite a bit that goes into buying a house, refinancing and different mortgage programs, we are here to guide you and educate you through the process from start to finish.
What is a conventional mortgage?
In simple terms, a conventional mortgage is a type of mortgage that is not insured or guaranteed by the federal government.
For instance, there are other types of loans, such as the Federal Housing Administration (FHA) and Veterans Affairs (VA), that are backed and insured by the federal government.
Conventional, or conforming, mortgage was setup to follow the guidelines setup by Fannie Mae and Freddie Mac.
Types of conventional mortgages?
Conventional mortgages can be both fixed mortgages or adjustable rate mortgages.
You are able to qualify for a conventional mortgages for both investment properties or second homes.
Here are some of the biggest benefits of a conventional mortgage:
- Predictable monthly payments
- Fixed rate mortgages protect you from increasing monthly payments
- Best plan if you wish to stay in your home for numerous years
- Mortgage insurance is required for loans exceeding 80% LTV. Whereas mortgage insurance is required on all FHA loans regardless of the LTV!
- Higher loan limits – the FHA loan will have max loan limits that varies per county. Conventional loans cover much higher loan amounts.
- Various loan types – Mortgage can be used for investment or second homes, whereas FHA cannot.
Even with all of the benefits of conventional loans, there are a few drawbacks too.
Because of the benefits of conventional mortgages, not everybody will qualify. Conventional loans require higher down payment as well as a higher credit score in order to qualify.
Private mortgage insurance (PMI) is still required for loans above 80% loan to value (LTV). And in some instances, there may be a possible prepayment penalty. However, the PMI will automatically drop off once the LTV reaches 80%.
Tip: If you have lived in your home for over 5 years, you may want to look into getting an appraisal to see if your house has reached 80% LTV through inflation and years of monthly payments!
How To Qualify:
As everybody’s situation is different, we would recommend reading our page on Home Buying Tips.
Give us a call so that we can advise you on how to pre-qualify and qualify for your next home purchase. We’re here to help.