The most common home loan type, conventional mortgages are fixed or adjustable rate loans that are not guaranteed by the government. These loans do not require mortgage insurance as long as you provide a 20% down payment.
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What Are Conforming Loans?
As the name suggests, conforming loans are mortgages that conform to the guidelines set in place by Fannie Mae and Freddie Mac. This page discusses conventional conforming loans.
Benefits of a Conventional Mortgage
- Down payments as low as 3% for first-time home buyers
- No private mortgage insurance (PMI) if your down payment is 20% or more
- PMI can be canceled automatically when the loan to value reaches 78%
- Can be used for second homes and investment properties
- Rates may be more competitive than USDA, FHA, or other government-backed options.
- Multiple fixed rate options & adjustable rate solutions
Fixed vs Adjustable Rate Loans
A fixed-rate mortgage is a home loan in which the interest rate is consistent throughout the life of the loan. This is a popular option because most home buyers prefer a stable monthly payment.
An adjustable-rate mortgage, or ARM, is a loan in which the interest rate is adjusted at periods throughout the loan, changing a monthly mortgage payment. Some buyers choose this product because the initial rate is typically lower than that of a fixed-rate loan.
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Is A Conventional Loan Right For You?
Conventional loans are a good option for buyers who have good credit, a larger down payment, and plan on staying in the home long term. Conventional mortgages come with the option to structure your loan’s terms at 15, 20, or 30 years. A 30-year term is the most popular. Conventional loans have fewer credit and income requirements.
Not sure if a conventional mortgage is right for you?