Conventional loans are a popular mortgage option for homebuyers. Here's an overview of what conventional loans are, their pros and cons, and why you should consider a conventional loan for your next home purchase.
What Are Conventional Loans?
Conventional loans are mortgages that are not offered or insured by a government entity like the Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA). Instead, they are provided by private lenders like banks, credit unions, mortgage companies and lenders like Texas Premier Mortgage.
The most common types of conventional loans are conforming loans, which adhere to loan limits set by Fannie Mae and Freddie Mac. For 2023, the conforming loan limit for a single-family home is $726,200. Loans above that amount are considered jumbo loans.
Benefits of Conventional Loans
Compared to government-backed FHA and VA loans, conventional loans offer several advantages:
Lower Mortgage Insurance
Conventional loans typically require lower mortgage insurance payments than FHA loans. With a down payment of 20% or more, you may be able to avoid mortgage insurance altogether with a conventional loan.
Higher Loan Limits
Conventional conforming loans go up to $726,200, while FHA loans are capped at $420,680 for a single-family home. In expensive housing markets, a conventional loan may be your only option.
Better Interest Rates
In general, conventional loans offer lower interest rates than FHA or VA loans, which can save you significantly on your monthly mortgage payment.
Fewer Fees
There are fewer fees associated with conventional loans compared to FHA loans and VA loans. This keeps your closing costs lower.
Flexible Qualifying Criteria
Conventional loans can offer more flexible qualifying criteria than government loans in terms of your credit score, down payment, and debt-to-income ratio. This makes them accessible to more borrowers.
When Conventional Loans Make Sense
Here are some instances when a conventional loan is likely your best mortgage option:
You have good to excellent credit (credit score of 680 or higher).
You can make a down payment of at least 5% or more.
You have minimal existing debt obligations.
You are purchasing a high-cost home that exceeds the FHA and VA loan limits.
You want to avoid mortgage insurance.
Get Started with Texas Premier Mortgage
If you're considering a conventional loan for your home financing needs, the loan experts at Texas Premier Mortgage can help. They have years of experience guiding homebuyers through the mortgage process and can help you determine if a conventional loan is your best option. They also offer competitive interest rates and top-notch customer service.
To get started or learn more about conventional mortgages, contact Texas Premier Mortgage today. Their team is ready to help you become a homeowners.