Advantages of Conventional Mortgages

Advantages of Conventional Mortgages

A conventional mortgage is one that is not insured or guaranteed by the federal government. Also, unlike mortgages that are sanctioned by the Federal Housing Administration or Veteran Affairs Department, these mortgages will not have the financial backing of the government. The easiest way to receive a conventional mortgage is to offer a large down payment. The following are the advantages of conventional mortgages.

Numerous lenders and payment options

As these loans are easy for the lending institutions to sell, you will be able to find several flexible mortgage plans that will be suitable for you. As there are very few limitations on these loans, lenders can easily sanction them. This flexibility allows lenders to provide a conventional mortgage on relaxed payment terms.

Decreased rates of interest

As these mortgages are offered by numerous lenders, they will compete with each other to offer you decreased interest rates. Also, if you offer to place a sizeable down payment when you take the loan, the rates will be decreased further as the lenders will have a lower risk of credit.

Avoid private mortgage insurance

When you opt for a conventional mortgage, the private mortgage insurance will not be needed after 20% of the equity of the property has been paid. This is a good way to save money as it will result in a significant decrease in the monthly payment amount. With the subsequent savings, you have the opportunity to receive better terms on refinancing the mortgage if and when it is required.

Lower eligibility criteria and increased limits of mortgage loans

When compared to the loans sanctioned by the Federal Housing Administration or Veteran Affairs Department, conventional mortgages have lenient criteria for eligibility.

These mortgages also have an increased mortgage limit. This means that you will now be able to purchase the pricey properties for which you will not receive a mortgage from commercial banks and other lending institutions. As the mortgage does not have to receive approval or funds from the government, it will be sanctioned quickly.

Mortgage alternatives for lower credit scores        

Usually, an approval of a mortgage loan requires solid credit scores. But, a conventional mortgage will be sanctioned even if you have a weak score of credit history. However, the mortgage may have higher rates of interest and stricter terms as the risk of credit will be higher for the lender.

Less time to pay off the mortgage

As these loans are offered by numerous lenders at flexible rates of interest, it will be faster to pay off this mortgage. Also, these mortgages will have lower closing costs than those sanctioned by the Federal Housing Administration. If you have deposited a sizeable down payment that is more than 20% of the equity of the property, you can eliminate private mortgage insurance from your monthly payments which will help you to pay off the mortgage quickly.

Several lenders offer a conventional mortgage on investment properties as well. This is an excellent way to avoid borrowing equity against your home. These mortgages are very common as they were among the first loans that were provided by local lenders. The lenders will decide the borrower’s loan eligibility and amount.

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