Conventional Financing

This is what is commonly know as your basic, stock loan. Conventional financing has many term options, but traditionally, a 30-year term or a 15-year term is what most people will choose. Some of the advantages of choosing conventional financing are as follows:

  1. A fixed interest rate that does not change over time.
  2. A low down payment option of 5% and sometimes 3% of your purchase price.
  3. If you decide to put 20% down or more on a home, you do not need to pay mortgage insurance or PMI (Private Mortgage Insurance). With FHA financing, no matter how much of a down payment you choose, you must pay mortgage insurance on your loan.
  4. Private mortgage insurance is often lower than FHA mortgage insurance. This is based on your credit score and the amount you use for your down payment. The more you put down, the lower your mortgage insurance will cost you.
  5. With conventional financing, if you decide not to put 20% down and you have mortgage insurance, the mortgage insurance will eventually go away over time. You can also look to remove it more quickly if your loan to value reaches 75% and a minimum of two years have passed since you received your loan. You can also look to refinance your home at an 80% loan to value or lower to remove the mortgage insurance. With FHA financing, regardless of time or loan to value, the mortgage insurance will never go away. You must refinance into a conventional loan to remove the mortgage insurance if you currently have an FHA loan.
  6. Conventional loans do not have any additional finance charges associated with them. FHA charges 1.75% of your purchase price to borrower their money. They add this into your loan vs make you pay it up front. VA charges you based on the number of times you use VA financing. Conventional does not have a charge to borrower their money other than the interest rate.
  7. Conventional loans are used to purchase second homes and investment properties. FHA and VA do not allow this.
  8. They accept gift funds from family for your down payment.

Additional Loan Types

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