A conventional loan is also sometimes referred to as non-Government Sponsored Enterprise (GSE) loans or conventional mortgage. A conventional loan refers to a loan that is not backed or guaranteed by a government entity like the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). There are six types of conventional loans. However, the two main types are Fixed-rate loans and Adjustable-rate mortgages (ARMs). Ratebeat offers both types of loans. Conventional loans typically follow guidelines set by Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation)
Eligibility For Conventional Loans
To be eligible for a conventional loan you should have :
- A good credit score of about 620 or higher. However, the better your credit score is the lesser the interest you will pay over the life of the loan.
- Two years of tax returns to show proof of your income.
- A cash balance at hand to cover the closing and additional costs.
- A down-payment of 20 percent to avoid paying private mortgage insurance which will cost 0.3 to 1.5 percent of your annual loan amount.
You should also ensure that your total debt amount does not exceed 45% of your income.
Conventional Home Loan Benefits
Conventional loans are available for buying a new home and refinancing. They are harder to qualify for than a government-insured loan due to the financial and credit score requirements.
However, they generally have much more flexible terms and fewer restrictions than government-backed mortgage loans.
The advantages of getting a conventional loan from Ratebeat are :
- They are much easier to qualify and apply for as there is less paperwork to do and you will have fewer rules and regulations to follow.
- As the terms are easier and more flexible, you have many more options to customize and match with your financial needs and goals—whether it is a 30-year or a 15-year term mortgage.
- If you have a 20% down payment or at least 20% equity when refinancing then there will be no requirement of mortgage insurance.
- The loan can be used to purchase all types of properties like condominiums, single and multi-family houses and even manufactured houses.
- The ability to refinance your mortgage into a conventional loan from any other loan type so that you can take advantage of the lower interest rates.
Depending on your needs our expert loan officers can help you find the right conventional loan.