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If you’re in need of a home mortgage, you may be trying to decide which particular mortgage is best for you.

One of the most popular types of home loans is a conventional mortgage. 

These types of loans are typically available through private lenders like

  • Credit unions
  • Banks
  • Mortgage companies

Essentially, a conventional mortgage means the loan isn’t secured or offered by a government entity.

It is possible, however, to have a conventional mortgage guaranteed by one of two government-sponsored enterprises:

  • Fannie Mae
  • Freddie Mac 

To secure a conventional mortgage you’ll

  • Complete a mortgage application
  • Send in required documents

Other things will be taken into consideration, including your

  • Credit history
  • Credit score

The difference between a conventional mortgage and a government-back mortgage for buyers often comes down to the interest rate.

Higher interest rate

Typically, the interest rate tends to be higher with a conventional loan. 

The rate you get is often determined by

  • Length of loan
  • Size of loan
  • Current market conditions

The interest rate is also tied to a borrower’s

  • Credit
  • Personal assets
  • Size of down payment

Besides the interest rate, a conventional mortgage generally comes with stricter lending requirements.

Who qualifies for a conventional mortgage?

  • Borrowers with solid credit

Your credit score considers your credit history and any late payments you’ve ever made. The higher your credit score, the lower the interest rate you’ll likely receive. 

  • Borrowers with an acceptable debt-to-income ratio

This takes into account all your monthly debt and compares it to your monthly income. You’ll want your debt-to-income ratio to be on the lower end.

  • Borrowers with a sizeable down payment

The ability to put down a larger down payment may also help secure a conventional mortgage.

On the other hand, some borrowers have a more difficult time gaining a conventional mortgage.

  • Recent bankruptcy or foreclosure
  • Lower credit score
  • Higher debt-to-income ratio
  • Lower down payment

What are the advantages?

If you are able to qualify, a conventional mortgage does come with some advantages. 

  • More properties qualify

You can use a conventional loan for a second home, or even an investment property.

  • You can avoid certain fees

You may also be able to avoid certain fees tied to government-backed loans. While you likely WILL have to pay some fees to the lender, you may not have to pay all the fees commonly connected to other loans. 

  • More choices

Another advantage with a conventional loan is that you don’t have to stick with, say, a 30-year fixed-rate conventional mortgage.

This may be the most common, but you can also look at either a 15 or 20-year loan, along with an adjustable-rate mortgage.

The lender’s able to offer you more options, which can help in securing a loan and the property you desire.

About the author

I am from Chicago, IL and I have been lending in this area for 20+ years. My team and I strive to give you an enjoyable mortgage experience while providing you the best programs and rates! I am also offering a FREE mortgage analysis to determine if refinancing is right for you.

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