January 27, 2020
January 27, 2020
Share this article:
Your mortgage shopping journey cannot be complete without encountering the term “conventional mortgage” or “conventional loan.” That is because it is one of the most popular types of mortgages. But it’s fame cannot guarantee that it’s the right form of mortgage satisfying your individual needs.
As at Everything Mortgages we really cover “EVERYTHING” to help you secure a competitively priced mortgage that suits your needs, it’s our almost pleasure to introduce you to another important topic in the world of mortgage shopping.
Let’s take a look at it all together!
In the simplest terms, a conventional mortgage is any type of home buyer’s loan that is not secured or offered by a government agency, such as FHA or VA. Did you know that conventional mortgage borrowers who put at least 20 percent down on a mortgage are not required to pay for mortgage insurance? This insurance is typically required in the cases with government-backed loans or down payments.
Other primary aspects of conventional mortgages include:
As mentioned in the above points, typically conventional mortgages have higher interest rates than FHA loans or government-backed mortgages.
Worth taking into account that the interest rate for conventional loans is dependent on several factors. Let’s review them in more detail. Some of the factors influencing the final interest rate include but are not limited to its length, its size, current economic and financial market condition, as well as whether it has an adjustable interest rate or a fixed one. Interestingly, mortgage lenders tend to set interest rates based on the expectation of upcoming inflations, considering that the demand for and the supply of mortgage-backed securities also have an influence on the rates.
Usually, interest rates have points linked to them that are paid to the lender or the broker. In short, the more points you gain, the lower your interest rate will be. If you are considering living in a home for a long time, let’s say about 10 years or more. These points can be a helpful feature to help you lower your interest rate of the loan.
The final important aspect that highly affects the interest rate of the loan is the individual borrower’s financial profile, which might include creditworthiness, personal assets, and the size of the down payment they can make on the residence to be financed.
Take into consideration that people with established credit and stellar credit reports and the ones that have a solid financial basis are more likely to get qualified for a conventional loan. Specifically, the ideal candidate should have at least some of the below-mentioned aspects.