Loan Options – How Do I Know a Conventional Loan is Right for Me?

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Figuring out how to pay for your new home is one of the most important considerations of the entire home-buying process. While most people borrow money via a mortgage, narrowing down your home loan options can feel a little intimidating. What’s the difference between a conventional loan and an FHA? How do you know a conventional loan is right for your needs? The Cushing Team can help you answer that more definitively, but here’s some general information to help you understand the basics.

The Conventional Home Loan

The conventional home loan is quite common, and it’s popular among first-time and experienced home buyers alike. The biggest differentiator between conventional home loans and other types of mortgages, including FHA, VA, and USDA home loans, is that they aren’t backed, or insured, by the federal government. Instead, they’re covered by Fannie Mae and Freddie Mac, which are government-sponsored enterprises (GSEs) that are privately owned and publicly chartered. As such, conventional home loans must meet requirements set forth by these entities.

Like other mortgages, conventional loans have a range of terms, including fixed mortgages from 10 to 15 to 30 years, or adjustable rate mortgages (ARM). With an ARM, interest rates can fluctuate during the term of the loan.

Conventional loans can also be attractive to prospective homeowners because interest rates are typically lower than with government or non-conforming loans (also known as jumbo loans). Choosing between fixed and adjustable rate mortgages will depend on financial circumstances and your long-term goals, and the Cushing Team is happy to advise you on this point as well.

Qualifying for a Conventional Home Loan

This is a good option for those with credit in the good to excellent range. However, an experienced mortgage lender may have financing options that make a conventional loan feasible even if your credit report has a ding or two.

To apply for a conventional loan, you’ll need to provide details relating to your:

  • Personal finances, including pay stubs, W2s, and tax returns
  • Employment
  • Funds for the down payment

About the 20% Down

It’s widely assumed that 20% percent of a home’s purchase price is what prospective homeowners need to qualify for a conventional loan. That’s not necessarily true. Still, the rule of thumb is to put down as much money as you can. The return for that big down payment includes:

  • Avoiding mortgage insurance
  • Qualifying for a lower interest rate
  • Getting the most affordable monthly payment

Down payment requirements will vary depending on the mortgage,and there are special programs with down payment assistance available to qualified borrowers. Again, this is where the right mortgage lender comes in handy. Here in Reno, the Cushing Team can take the guesswork out of the lending process.

One More Tip

While the house hunt can be hard to resist, knowing what you can afford is always the right place to start. Contact the Cushing Team now, and we’ll help you decide on the right loan for your needs. Getting approved isn’t always an instant thing, so get your ducks in a row now. That way, you can zero in on the house of your dreams – with terms that work for you and your family.

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