Conventional Mortgage

For more flexibility and options, the right choice could be a Conventional Loan

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What is a Conventional Mortgage?

A conventional mortgage is a home loan that is not backed by a government agency. A “conventional mortgage” or “conventional loan” simply refers to any mortgage loan that is not insured or guaranteed by Federal Government agencies such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA).

A conventional home loan often meets the down payment and income requirements set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Conventional loans will also often conform to the loan limits set by the FHFA (Federal Housing Finance Administration).

Conventional mortgage borrowers who put at least 20% down don’t have to pay for mortgage insurance. Mortgage companies like On Q Financial, LLC. are required to make borrowers purchase mortgage insurance, which protects the lender if the buyer defaults on the mortgage. However, for borrowers, this type of insurance has benefits as well. Getting mortgage insurance allows borrowers to purchase a home before they have a full 20 % down payment saved. This can open up more opportunities for home buyers.

What are the Benefits?

A conventional loan is a great option for borrowers with good credit and a low debt-to-income (DTI) ratio who can make a down payment of 20%

This allows them to avoid paying for private mortgage insurance (PMI). Borrowers looking for a lower down payment can also make down payments as low as 3%- they’ll just need to pay for PMI until the loan amortizes down to a 78% LTV, or at an 80% LTV they can contact their servicer to see if they can have the Mortgage insurance removed based on the equity in their home. With conventional loans, borrowers also have options for lender-paid mortgage insurance (LPMI) which is offered at a higher interest rate, but this removes a monthly mortgage insurance fee from the borrower’s total mortgage payment.

  • No private mortgage insurance is required with a 20% down payment
  • Multiple mortgage insurance options for LTV’s greater than 80%
  • All funds can come from a gift on a primary residence conforming loan amount
  • Financing available for single family homes and other property types up to 4-unit properties 2nd homes
  • Residential investment properties up to 10 financed properties

Why are Conventional Loans Important for Realtors?

Conventional loans are a topic every realtor should be discussing with their clients. First time home buyers, especially, will rejoice at the flexible down payment options.  Conventional loans can also account for the range in home prices that borrowers will be interested in purchasing because these loans can be either conforming or nonconforming.  If a loan amount needed exceeds the loan limit for an area, a borrower can apply for a nonconforming conventional loan for the true amount they need to borrow. The flexibility in choices and options that innately comes with conventional loans is something every realtor should be speaking about with their clients.

Conventional Loans vs Other Loans

*3% down if at least one buyer is a first time homebuyer or can meet area income guidelines.