January 27, 2020

A Guide to Conventional Mortgages

A Guide to Conventional Mortgages

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Manzeel Patel

Manzeel Patel

Mortgage Broker, LIC M11002628, Level #2

Manzeel is an award-winning Mortgage Broker and the Owner of the Toronto-based mortgage, Everything Mortgages. With 16 years of experience in the Canadian mortgage industry and a formal background in mortgage underwriting, Manzeel’s lending expertise gives him unique insight into whether a deal is feasible which empowers his clients to make more informed lending decisions faster. He has been recognized as one of Canada’s Top 10 Mortgage Brokers by the national Canadian Mortgage Professionals (CMP) Association. Him and his team of 18 mortgage agents are proud to offer a mortgage experience that's built on honesty, trust, and integrity. He prides himself on the brokerage’s dedication to deliver an excellent client experience throughout the entire home loan process from pre-approval to post-funding. Since moving to Toronto in 1998, Manzeel has successfully launched and scaled several businesses from the ground up, ranging from a mortgage brokerage and a vast real estate investment portfolio to a private financing eCommerce platform. He continues to be a leader in the real estate industry as he uses his analytical expertise to seek new real estate investment opportunities. As a tech junkie and avid sports enthusiast, when Manzeel’s not working with clients, you can find him  reading technology blogs, playing squash or watching tennis with his two boys.

307-18 Wynford Drive,
North York ON, M3C 3S2

manzeel@everythingmortgages.ca

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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! 

What Is a Conventional Mortgage or Loan?

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: 

  • Those are typically available through or guaranteed by a private lender,
  • Potential borrowers need to complete an official mortgage application, credit history, supply required documents, and current credit score.
  • The interest rates for conventional mortgages tend to be higher than those of government-backed mortgages, such as FHA loans.

Interest Rates For Conventional Mortgages

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.

Who is Likely to Qualify?

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.

  • A high credit score. Particularly, a score of at least 680 and, preferably, well over 700. Notably, the higher your credit score is the lower your interest will be. Best terms are typically being reserved for those over 740.
  • An acceptable debt-to-income ratio (DTI). This is your monthly debt payments divided by your gross monthly income. 
  • A down payment of at least 20% of the price of purchased home available. Lenders do actually take and accept less than 20%, but even in that case they mostly will also require borrowers to take out private mortgage insurances and make monthly premium payments, until they will achieve the mentioned 20% equity in the house.

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