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Conventional Home Loan

Conventiona loans are backed by a private, non-government entity and are made available through wholesale lenders and other financial institutions. Like many other loan products, Conventional Loans can have either fixed or adjustable rates. 

A fixed-rate mortgage means that your rate will be the same one that you agreed to prior to closing throughout the life of the loan. An adjustable-rate mortgage (ARM) means that your mortgage rate will stay fixed for a certain number of years (usually 5 or 10) and then it will fluctuate. Many homeowners prefer the stability of a fixed-rate mortgage, but the lower initial rate of an adjustable-rate mortgage is something to consider. The ARM becomes especially attractive if you know that you will be moving after a few years, before the rate begins to change. Even if you decide to stay in the home after getting an adjustable rate, keep in mind that you can always refinance to a fixed rate in the future as rates begin to decrease. 

Let's dive into some of the finer details about conventional mortgages. Conforming loans are limited to $647,200 in most counties and lenders generally prefer to see a FICO credit score of 640 or higher. Down payments for conventional mortgages can be as little as 3% down. However, mortgages with a Loan-To-Value (LTV) ratio higher than 80% will likely require mortgage insurance, which will go away once you have 20% equity in your home.

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