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Everything You Need to Know About Conventional Home Loans for Achieving Homeownership

Real estate agent working sign agreement document contract for home loan insurance

When it comes to purchasing a home, conventional home loans are a popular choice for many aspiring homeowners. These loans, offered by private lenders and not backed by a government agency, provide a flexible and reliable option for individuals with higher credit scores. In this blog, we will cover everything you need to know about conventional home loans, their benefits, and how they can help you achieve your dream of homeownership.

1. Understanding Conventional Home Loans:

Conventional home loans are mortgages that are not insured or guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). Instead, they are backed by private lenders, offering borrowers more flexibility in terms of loan options and requirements.

2. Higher Credit Score Requirements:

Compared to FHA or VA loans, conventional home loans typically require higher credit scores. Lenders generally look for a credit score of 620 or above, although some may accept lower scores depending on other factors. Having a higher credit score demonstrates your ability to manage debt responsibly and increases your chances of qualifying for a conventional loan.

3. Down Payment Options:

Conventional loans offer a range of down payment options, allowing borrowers to choose what works best for their financial situation. While a 20% down payment is often recommended to avoid private mortgage insurance (PMI), it is not always required. Some lenders offer conventional loans with down payments as low as 3%, making homeownership more accessible for those who may not have substantial savings.

4. Flexible Loan Terms:

Conventional home loans provide borrowers with a variety of loan term options, typically ranging from 10 to 30 years. This flexibility allows you to choose a repayment plan that aligns with your financial goals and budget. Shorter loan terms may result in higher monthly payments but can save you money in interest over the life of the loan.

5. No Mortgage Insurance Options:

If you can afford a larger down payment or have built up enough equity in your home, you may be eligible for a conventional loan without private mortgage insurance (PMI). PMI is typically required for borrowers who put down less than 20% on their home purchase. However, once you reach 20% equity in your home, you can request to have PMI removed, potentially reducing your monthly mortgage payments.

6. Investment Property Financing:

Conventional home loans are also a popular choice for financing investment properties. Whether you’re looking to purchase a rental property or a second home, conventional loans offer competitive interest rates and terms for these types of investments.

Conclusion:

Conventional home loans provide a flexible and reliable option for individuals with higher credit scores who are looking to achieve homeownership. With their higher credit score requirements, various down payment options, flexible loan terms, and the possibility of avoiding private mortgage insurance, conventional loans offer borrowers the opportunity to tailor their mortgage to their specific needs and financial goals. If you have a good credit score and are ready to embark on your homeownership journey, consider exploring the benefits of conventional home loans and take the first step towards owning your dream home.