Conventional Loans

Conventional Loans

Secure Your Piece of the American Dream With a Conventional Mortgage

You have two options, basically, when securing a mortgage for your home – you can secure a loan that is guaranteed by a government agency (typically such agencies are the FHA or VA) or one that is not guaranteed. While government-backed loans are very popular, the conventional type of mortgage is a good option for many people.

There are some things to be aware of if you are seeking a “conventional” mortgage (not government-backed):

To secure one of these loans you should have solid credit and access to funds for a substantial down payment (especially if you are going to opt-out of mortgage insurance, which is usually required by government home loans or by those making smaller down payments). This makes a conventional mortgage a good option for traditional borrowers who are on their second or third home mortgage.

The borrowing requirements are somewhat more stringent for conventional mortgage loans and the reason is obvious: With a VA or FHA loan, the government guarantees the mortgage if you are not able to pay (which is why persons with lower income or poorer credit typically seek them). But with a conventional mortgage if you default there is no back-up guarantor who will step in, so lenders are more cautious about granting these types of loans.

Because conventional mortgage terms are more stringent, if you are able to secure one, you will may be able to qualify for a lower interest rate, and if you can combine that with a shorter loan term (15- rather than 30-year, for example), that will reduce your total expense tremendously.

Even if you go with a traditional 30-year mortgage, you can still save significant amounts of money if your interest rate is smaller. Especially if you are borrowing a lot of money, even a small reduction in your interest rate can reduce your loan’s financial impact.

If you have good to excellent credit, can make a significant down payment, and can afford to be charged a higher out-of-pocket cost for fees, and have an established income, then a conventional mortgage may be a good choice for you.

All other things being equal, borrowers with better credit and work histories, and who may have  successfully financed homes in the past, stand a better chance of qualifying for a conventional mortgage than borrowers who have more complicated financial histories (like debts or bankruptcies, or less stable monthly income levels).

As for down payments, there are many lenders today who accept lower down payments – typically 3%, which is a very good rate as the minimum down payment for an FHA loan, for example, is 35%. But some lenders may require more – sometimes up to 20% of the borrowed amount – depending on the borrower’s credit history, regional variations, and other factors. Depending on your lender as well as the specifics of your loan contract, you may be required to pay any origination fees, mortgage insurance (if you are required to have it), home inspection and appraisal fees.

Contact us at Trillion Mortgage to get started, to get further information or just ask questions that you might have. The sooner you secure your mortgage, the sooner you’ll own your own piece of the American pie!

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