A conventional loan is a popular type of mortgage not backed by the government, offered by private lenders like banks and mortgage companies. These loans often require a higher credit score and can come with a down payment as low as 3%, but if the down payment is less than 20%, you will need private mortgage insurance (PMI). Conventional loans are available with fixed or adjustable interest rates and various term lengths, such as 15 or 30 years. Loan limits are set by Fannie Mae and Freddie Mac, ensuring they meet certain standards.
Credit Requirements: Conventional loans typically require a higher credit score compared to government-backed loans. A score of 620 or higher is generally needed.
Down Payment: You can secure a conventional loan with a down payment as low as 3%. However, if you put down less than 20%, you will need to pay for private mortgage insurance (PMI).
Loan Limits: The loan limits for conventional mortgages are set by Fannie Mae and Freddie Mac and can vary by location. In 2024, the baseline limit is $726,200 in most areas but can be higher in high-cost regions.
Interest Rates: Conventional loans can come with fixed or adjustable interest rates. Fixed-rate loans have a consistent interest rate over the life of the loan, while adjustable-rate mortgages (ARMs) can change over time based on market conditions.
Long Terms: You can choose from various loan terms, typically ranging from 15 to 30 years. Shorter-term loans often come with higher monthly payments but lower overall interest costs.
No Upfront Mortgage Insurance Premium:
Unlike FHA loans, conventional loans do not require an upfront mortgage insurance premium.
Potentially Lower Costs: With good credit, you may secure a lower interest rate and monthly payment compared to government-backed loans.
Flexibility: Conventional loans offer a variety of options for loan terms and down payments, making them adaptable to different final situations.
Conventional loans are ideal for borrowers with strong credit and the ability to make a down payment. They offer competitive rates and flexible terms, but the higher credit and down payment requirements can be a barrier for some.
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At Generation Mortgage Associates LLC , we partner with over 50 top lenders nationwide to find the best mortgage loan tailored to your specific needs. Regardless of your financial situation, credit history or income, we can secure a mortgage for you.
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