Conventional loans are available for various home loans and are an excellent option for many aspiring homeowners. With these loans, there’s no government backing, but that doesn’t mean they’re not safe. You’re still considered a qualified borrower, and the lender assumes you meet the lending guidelines.
The main difference with other loans is that with conventional loans, the lender provides the entire amount of the loan and is solely responsible for covering any losses. If you were to default, the lender would lose their money and wouldn’t be able to get any help from the government.
That is why many lenders require a higher down payment with a conventional loan and will calculate your ability to repay the loan based on your ability to fund at least 20 percent of the home. We also offer options with as little as 3% down, which is actually less than an FHA loan.
Because jumbo loans exceed the FHA loan limits of $420,680, these are typically used by homebuyers who want to purchase a slightly more expensive home.
Because the loans are higher risk, a higher down payment is typically required. The higher amount will also give lenders a more considerable amount of security in the case that you have to default on the loan.
Despite the additional requirements, many homebuyers are drawn to these loans. Because the application process is simpler than the FHA loan process, it’s an excellent option for those who aren’t comfortable using FHA-insured loans.
Benefits of Conventional Loans
Conventional loans are available to a wide variety of borrowers and offer several great perks that make them a perfect fit for many homebuyers.
Here are a few of the benefits you would get if you apply for any of the mentioned loan types:
- They’re More Flexible. Borrowers can choose from various loan types, from 15-year FHA loans to 30-year fixed loans.
- Lower Interest Rates. Conventional loans typically have lower interest rates and closing costs, making them a more affordable option.
Contact Our Mortgage Specialist Today!
Are you a first-time home buyer looking for the best loan for your needs? Our friendly loan experts would love to help you find your dream home, whether buying a new home or refinancing a mortgage. We have been serving home buyers and homeowners in Tustin, California and throughout the US. for over 75 years. Contact us at (248) 775-1275 today!