Ridge Realty LLC
Ridge Realty LLC
Diane Morris, Ridge Realty LLCPhone: (828) 713-1678
Email: [email protected]

Conventional mortgages: Here's what you should know

by Diane Morris 11/21/2022

Conventional mortgages are the most popular form of home financing for buyers in the United States. However, it may not always be clear how these loans differ from other loans, such as those provided by government agencies. To help you gain a better understanding of conventional loan basics, here is a quick guide with further information:

The best way to qualify for a conventional loan

When obtaining conventional financing, your lender will examine your financial situation. The loan officer may request information including your credit score, income statements and debt to income ratios.

A down payment is required for conventional loans. Each lender has different minimum requirements, but the larger the down payment, the less money you’ll have to pay back over time.

Minimum required down payments

Many believe a 20% down payment is required for conventional loans, but the minimum requirement is typically much lower. You can find mortgages with minimum down payment requirements anywhere from 3% to 20% of the overall purchase price. 

Your choice of down payment amount can affect the terms of your mortgage, like interest rate or the need for private mortgage insurance.

Conventional loan vs a government loan

Government-backed home loans have specific features to suit some homebuyers. 

The Federal Housing Administration (FHA) is a government institution offering home loans for buyers who meet certain qualifications. Government-backed loans have advantages for those with bad credit or other financial roadblocks, but require other qualifications for approval.

Interest rates

Conventional mortgages tend to have higher interest rates than FHA loans, although these loans typically require borrowers to pay mortgage-insurance premiums. 

Interest rates charged on a conventional mortgage vary by several factors, including the term and amount borrowed. However, interest rates are also subject to change every year based on the overall economy. Many buyers choose to wait for a period when interest rates are lower to apply for a mortgage, regardless of the loan type.

Ultimately, your choice of loan will depend on your personal circumstances. The more you know about different types of mortgage, the better equipped you’ll be for your journey into thefinancial real estate marketplace.

About the Author
Author

Diane Morris

Serving WNC real estate since 1987, I am the owner/broker of Ridge Realty LLC. Located above my husband's State Farm Ofc in the heart of Black Mountain and right around the corner from Cup of Jomo, my son's coffee shop. I was thrilled to be able to bring back the name of the firm that my father-in-law Charles W. Morris started in 1972. A 50 year old family owned business. Jerry and I began working for Ridge Realty in 1987 and now I can carry on the family business in Black Mountain. Reach out to me and I would be happy to speak with you about your real estate needs.