Conventional Loans: Flexible Financing for Your Dream Home
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What Are Conventional Loans?
Conventional Loans are a popular choice among homebuyers for several reasons.
Broad Applicability
Conventional Loans are not backed by a government agency, such as the FHA or VA. Instead, they are guaranteed by Fannie Mae or Freddie Mac and issued by private lenders, making them suitable for a wide range of borrowers.
Flexible Terms
These loans offer a range of terms, including fixed-rate and adjustable-rate options, allowing borrowers to customize their mortgage to their financial situation and goals.
Competitive Interest Rates
Conventional Loans often come with competitive interest rates, making them an attractive option for borrowers with strong credit history.
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Conventional Loans can require as little as a 3% down payment for qualified borrowers, making homeownership more accessible, especially for first-time buyers.
Unlike some government-backed loans, Conventional Loans typically do not require upfront mortgage insurance premiums, potentially saving you money at the outset of your mortgage.
If your down payment is less than 20%, you may need to pay for private mortgage insurance. However, as you build equity in your home, you may be able to cancel PMI, reducing your monthly expenses.
Conventional Loans often come with competitive interest rates, particularly for borrowers with strong credit histories. These rates can result in lower monthly payments and long-term savings.
Conventional Loans offer greater flexibility when it comes to loan amounts. Whether you're looking to finance a starter home or a more substantial property, Conventional Loans can accommodate a wide range of borrowing needs.
There are two main types of conventional loans
Fixed-rate mortgages (FRM)
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With a fixed-rate mortgage, your interest rate and monthly payment stay the same for the life of the loan. This type of loan is a good option if you want to have predictable monthly payments and you are not comfortable with the risk of interest rates rising.
Adjustable-rate mortgages (ARMs)
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ARMs typically have a lower initial interest rate than fixed-rate mortgages, but your interest rate could go up over time. ARMs can be a good option if you are comfortable with the risk of rising interest rates and you can afford to make higher monthly payments if your interest rate increases.
Determining whether a Conventional Loan is the right fit for your homeownership journey depends on your unique circumstances and goals. Here are some factors to consider.
Credit Score
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Conventional Loans generally require a higher credit score than some other loan types. However, they offer more flexibility in terms of credit history.
Down Payment
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Evaluate your ability to make a down payment, as Conventional Loans can accommodate both small and larger down payments.
Long vs. Short-Term
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Decide between a fixed-rate or adjustable-rate Conventional Loan based on your long-term financial outlook.
Get Started Today!
Contact us today to learn more about conventonal loans and start the application process.
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Frequently Asked Questions!
To qualify for a conventional loan, you will typically need to have a credit score of at least 620 and a debt-to-income ratio of no more than 43%. You will also need to have a down payment of at least 3%, but a down payment of 20% or more is recommended to avoid PMI.
The maximum loan amount for a conventional loan is set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that purchase mortgages from lenders. For 2023, the conforming loan limit for a single-family home is $726,200. However, there are higher loan limits in certain high-cost areas
Yes, you can use a conventional loan to refinance your home. This can be a good option if you want to lower your interest rate, shorten your loan term, or consolidate debt.
Yes, you can use a conventional loan to buy a second home or investment property. However, you will typically need to make a larger down payment (as much as 25%) on these types of loans.
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Questions & AnswerFirst-Time Homebuying Guide
Remember that buying your first home is a significant milestone, and being well-prepared and informed can lead to a successful and fulfilling homeownership experience.
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