Is a Conventional Home Loan Right for You?
We know that today there are several different mortgage options available for first time buyers or current homeowners. Usually when people think of mortgages, they only think of a sort of umbrella term that encompasses all mortgage types and packages. However, we’re here to help guide new and past buyers through all the twists and turns and terms that come with buying a new property.
What is a Mortgage?
A mortgage is defined as either being government backed or conventional. Government backed mortgages are insured by agencies like the Federal Housing Administration (FHA) or the Department of Veteran Affairs (VA) among others. Lower income borrowers and those who have served in the armed forces typically go the route of government back mortgages. However, for those who do not have any government backed mortgages, there are conventional loans.
What is a conventional Home Loan?
Conventional home loans in Fort Lauderdale, FL are mortgages that are not backed or guaranteed by the government agencies. Conventional loans held by mortgage lenders on their own are also known as “portfolio” loans. This is because lenders can set their own guidelines for these loans and do not sell them to investors. This is good for first time buyers as they have more room to negotiate payment and interest rates. Another positive about conventional home loans is that the interest rates can be adjustable but always for a fixed term. This means that a lower interest rate for a 3 to 5 to 7 year period is available for families or buyers that qualify for lower interest rates.
Conventional Loans Offer Many More Options
This type of loan is the alternative to the FHA loans, which offer a lot more variety compared to the FHA. With a conventional loan buyers can get a variety of loan types. Additionally, there is more wiggle room for adjustable rates. For individuals who need a larger loan, conventional loans are the best option. This is because conventional loans are not capped at a certain loan limit. Conventional home loans come in a wide variety of term limits ranging from 10, 15, 20, 25, and 30 year terms. This is great for people who either are feeling ambitious or have the cash to pay the mortgage down quick. On the flip side, it’s also good for buyers who might be starting a family soon or just don’t feel the need to be as aggressive in paying down the mortgage. Either way, there’s a payment term for every buyers’ needs.
No Insurance Required
With a conventional loan, buyers do not have to pay a mortgage insurance premium. Of course, assuming a buyer doesn’t have heaps of cash sitting around waiting to be burned, this is only true so long as a buyer puts down 20% of the total cost of the property. Typically, conventional loans will always require a down payment. Anywhere between five and twenty percent of the total cost is acceptable for a down payment on a property. However, this is better for the buyer in the long run because it will lower the monthly payments and help to offset some of the weight of the interest rate.
Looking to get a conventional home loan in Fort Lauderdale, FL? Well, it won’t take a long time to look. Fortunately, conventional home loans are available at nearly every lender office and at every bank. This makes it easy to shop around and get the best available rates for buyers. Also, keep in mind that conventional home loans can be used to finance just about any property. Some properties, like condo complexes, are not approved for certain types of financing, which make it difficult to pull lines of credit from.
Whether a buyer is new to home buying or just looking to make a change or invest in a new property, these choices can make things a bit confusing at times. However, it’s important that, when buying or even just looking to buy, to speak with a banking or lender professional to determine what loan terms are right for you. Buying a new property is an exciting time and shouldn’t be any more stressful than it already is. With conventional home loan, buyers can get the loan amount they need.