Conventional Loans

You have two broad options when you want a mortgage: a government-insured loan like an FHA loan or VA loan , or a conventional loan. Conventional mortgages are not backed by the government, but rather insured by private companies.

As conventional mortgages are not backed by the government, they are viewed as a higher risk and thus have higher standards you must meet to be approved. Conventional mortgage lenders have higher income and credit guidelines, but they offer a range of advantages to borrowers.

Advantages of a Conventional Mortgage

Conventional home loans are usually the best choice if you have excellent credit and can put down at least 20% on your loan. Conventional mortgages are very flexible, as they can be used to buy not only a primary residence, but also an investment property or a vacation home. This is unlike VA loans and FA loans which can only be used to buy your primary residence. Conventional home loans can have a term of anywhere from one to forty years, and either a fixed or adjustable interest rate.

There are many important benefits to choosing a conventional loan over a government-backed loan including:

Much lower fees than FHA mortgages.
Private mortgage insurance (PMI) is only required when you put down less than 20%.
PMI, if necessary, can be removed as soon as you build enough equity, unlike FHA loans.
Down payments as low as 3% for well-qualified borrowers.
Loans typically close faster.

Qualifications for a Conventional Loan

Conventional loans have stricter requirements than government insured loans. General guidelines for getting approved include:

Down payment as low as 3% (or 20% to avoid PMI)
FICO score of 740 or higher
Monthly housing costs should not exceed 28% of your gross (pre-tax) monthly income
Monthly debt should not exceed 36% of your gross monthly income
Must be discharged from Chapter 7 bankruptcy for at least 4 years and reestablished credit

If you qualify for a conventional mortgage, it is most likely a better option for you than an FHA mortgage. FHA loans, unfortunately, have become more costly over the last few years due to increasing insurance premiums.

Conventional Loan vs

Government Insured Loans

When you are deciding between a conventional and government insured mortgage such as FHA or VA, think about what is most important to you. If you have excellent credit and the ability to put down 20%, a conventional mortgage will save you more in the long run. If you want to pay less up front and get a higher monthly mortgage payment, you may prefer a government-backed mortgage.

If You Gotta Get A Mortgage, Call Summit Funding Today!

About us

Most of our business comes from referrals and we believe in building trust with our clients. Our mission is to give you the information that will help you make the best decision for YOU. We pride ourselves in delivering ethical and professional counsel, and that is why each year we continue to grow, helping home buyers get the best loan terms available.

Summit Funding Registered Mortgage Broker (NMLS #52081) New York State Department of Financial Services 7030 137 Street, Flushing, NY 11367
Summit Funding Licensed Correspondent Mortgage Lender (NMLS #301151) New Jersey Department of Banking and Insurance 100 Challenger Road #402, Ridgefield Park, NJ 07660
Summit Funding Inc, Your Mortgage Professionals Licensed Mortgage Broker (NMLS #84943) State of Connecticut Department of Banking 7030 137 Street, Flushing, NY 11367
Summit Funding, Your Mortgage Professionals, Inc. Licensed Mortgage Broker (NMLS #84943) Florida Office of Financial Regulation 7030 137 Street, Flushing, NY 11367