Conventional Mortgage Benefits
A conventional mortgage refers to a type of home loan that is NOT insured or guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, it is offered and backed by private lenders, including Fannie Mae and Freddie Mac. There are several benefits associated with conventional mortgages:
Flexible Loan Terms
Conventional mortgages offer a wide range of loan terms, including 15-year, 20-year, and 30-year options. Borrowers can choose the term and loan type that best fits their financial goals and budget.
Conventional mortgage lenders may be more flexible when it comes to approving borrowers with unique financial situations or non-standard property types. Government-backed loans have stricter eligibility criteria.
No Funding Fee (VA) or Upfront Mortgage Insurance Premium (FHA)
VA loans and FHA loans typically charge an additional cost in exchange for their low and/or no down payment options. This is a mandatory fee (exceptions apply for VA), which can be financed into your loan amount are required. Conventional loans do not have this additional cost.
Conventional mortgage holders have the flexibility to refinance their loans when market conditions or personal financial situations change, potentially securing a lower interest rate or adjusting the loan term.
Conventional mortgages are available to a broader range of borrowers, including those who may not qualify for government-backed loans due to income or credit score requirements.
Private Mortgage Insurance (PMI) Options
While conventional loans may require private mortgage insurance if the down payment is less than 20%, borrowers have options to cancel PMI once they build enough equity in their homes, whereas government-backed loans often require mortgage insurance for the life of the loan.
It’s important to note that the specific terms and benefits of a conventional mortgage can vary depending on the lender and the borrower’s financial situation. Borrowers should shop around and compare offers from different lenders to find the best conventional mortgage that suits their needs and financial goals. Additionally, eligibility for a conventional mortgage may depend on factors such as credit score, income, and down payment size.