Conventional Financing

With mortgage rates being at record lows, many people are ready to purchase a home or refinance their existing mortgage. If you are one of the many Americans who want to take advantage of one of the best times in many generations to buy or refinance, you are probably weighing the loan options that are available to you.

Conventional Loans offer some of the lowest rates in history, with 15 year conventional fixed-rate mortgage rates at an all-time record low.

Why should you choose Conventional Financing?

They offer the most competitive mortgage rates. Due to the FHA approving loans for borrowers with lower credit, there is a greater risk associated with those types of loans, meaning the rates are generally slightly higher.  Good credit requirements for conventional loans offer borrowers lower rates when compared to FHA loans.

There is no MIP at closing. FHA loans come with mortgage insurance premiums (MIP) that are built in over the course of the loan.  When you close, there’s also a one-time upfront mortgage insurance premium due – currently 1.75% of the total loan amount.  Conventional loans do not require this upfront premium.

For example, a 200,000 loan amount would carry a $225.00 per month for Private Mortgage Insurance and a $3500 MIP fee for doing a FHA loan to the back of the loan

The terms are more flexible. Conventional loans offer several repayment period terms.  Different repayment terms offer different, more competitive mortgage rates.  The faster your term, the lower your rate.  Choose between 10-, 15-, 20-, 25- or 30-year repayment periods.  FHA loans generally do not offer as many options.

If you have less than perfect credit and don’t have enough for the standard 5-20% down payment, an FHA loan may be the better option for you.  If you have good credit, a stable job and a sizable down payment – you could save more money over the life of your loan by going with a conventional option.  If you need more help figuring out which option best suits you, you can always reach out to a Home Loan Expert or your financial advisor.  But be sure to act quickly as these low mortgage rates are not going to last forever.

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