ALL ABOUT CONVENTIONAL LOANS

What makes a conventional loan...conventional?

As the name suggests, conventional loans are a popular choice for many Americans. This mortgage offers diverse down payment choices and various term lengths on fixed-rate mortgages. These benefits make conventional loans are a popular choice for many home owners.

Unlike other types of loans, conventional mortgages are not insured or guaranteed by government agencies (like the Federal Housing Administration, Department of Veterans Affairs, or the U.S. Department of Agriculture). Since conventional loans are not guaranteed, you may have to pay mortgage insurance if you put down less than 20%.

There are two types of conventional home loans

Conforming Conventional Loans

Conventional loans conform to guidelines established by Freddie Mac and Fannie Mae. These two organizations are government-sponsored enterprises that buy mortgages from lenders and sell them to investors, and the guidelines they publish are designed to help those investments perform well.

Non-conforming Conventional Loans

Non-conforming loans, also known as "jumbo" loans, are used when the loan amount is above the conforming loan limit for the property's area. You can look up conforming loan limits here.

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Who should use a conventional loan?

Do you have a strong credit history, steady income, and a large down payment in the bank? A conventional loan might be a great mortgage for you to consider. Don’t worry if you don’t have all those items quite yet – you could still be eligible for a conventional loan.

Your eligibility for a conventional loan will depend on your financial and credit history. A few of the most important things your lender will look at are your credit score, debt-to-income ratio, income stream(s), and available funds. The great thing about conventional loans is that there is some flexibility based on your circumstances.

What are the benefits of a conventional loan?

A lot of what you’re eligible for will be dependent on your specific situation. However, benefits of conventional loans include lower interest rates, a variety of down payment options, varying term lengths for fixed-rate mortgages, and reduced mortgage insurance (MI) requirements. The good news is that you won’t have to pay MI forever, because you typically have the option to cancel the MI once you have reached 20% equity in the property.

How to Apply with Blue Spot Home Loans

Getting started is easy! Our loan officers can help you navigate your process from pre-approval to underwriting, appraisal to closing. Reach out today and our loan experts can help you get started.

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