Conventional Mortgage Loans

Conventional or conforming loans refer to any mortgage that is not insured by the federal government. These types of mortgages follow the terms and conditions set by Fannie Mae and Freddie Mac. They are government sponsored institutions who are the largest purchasers of mortgages in the United States. These loans have stricter qualifying guidelines compared to government insured loans.

Higher credit scores are recommended for this program since it will directly impact your monthly mortgage payment. Your debt-to-income ratio is also carefully reviewed and needs to be below 50%.

A common misconception about conventional mortgages is that a 20% down payment is required in order to qualify. The reality is conventional financing allows for as low as a 3% down payment when used in combination with monthly mortgage insurance and other qualifying parameters.

Conventional loans are one of the best options for prospective borrowers with high credit scores. By having a higher credit score additional benefits become available like no mortgage insurance, lower down payments, and more competitive pricing. When considering a new home loan conventional financing should be at the top of the list if you have above average credit, a larger down payment, or would like to avoid the additional cost sometimes associated with government insured loans.