Conventional Mortgages
Unlock the door to homeownership with our Conventional Mortgages.
Conventional Mortgages
Conventional Mortgages are typically best suited for borrowers with a credit score of around 680 and higher.
The suitability is driven by rate and mortgage insurance premium (assuming required) because as Credit Score falls, typically the mortgage rate increases, making other options, like FHA (see below) more attractive.
Conventional loans are the Gold Standard of mortgage lending. They are ultimately financed by Fannie Mae and Freddie Mac – the largest investors of mortgages in the USA – and for this reason they are easier and faster to close, require relatively low amounts of documentation and come with very competitive loan terms.
Down Payment Requirements
The minimum required Down Payment for a conventional mortgage is 3.0% of the Purchase Price
5.0% down payments are advised however, as loan terms will worsen with lower down payments.
Borrowers with incomes falling below certain thresholds (based on property location) may be entitled to improved mortgage rates and more affordable Mortgage Insurance. Click the button below and see if you may be eligible for an “Affordability Loan”.
Click on the button and enter a property address. If your income falls below the 80% AMI you may be able to put down as little as 3.0% and get better Mortgage Insurance terms.
Loan Terms and Fixed Vs ARMs
Conventional Loans are offered as standard Fixed Rate Mortgages (FRM, or “Fixed” loans) and Adjustable Rate Mortgages (or “ARM” loans).
Fixed Rate Mortgages
Available in 30-, 25-, 20-, 15- and 10-Year fixed rate terms. Fixed Rate mortgages are considered a safer option over ARM loan because their future payments are stable and predictable.
ARMs
Which are typically offered in 30 year terms, have a short, initial Fixed period with a low "teaser" interest rate. The initial fixed period can be 5, 7 or 10 years. After the fixed term ends, the interest rate can adjust every six or 12 months. ARMs are considered riskier than Fixed Mortgages because the interest rates can increase over time, which can increase monthly payments.
Mortgage Insurance
Mortgage Insurance is only required on loans with less than 20% down payment. Mortgage Insurance is more expensive when the loan attributes are riskier – i.e. the lower a borrower’s Credit Score and Down Payment the higher the monthly premium.
For example, all things being equal, a borrower with a credit score of 700 with a 5% down=payment may pay more Mortgage Insurance each month than a 780 credit score borrower putting 10% down.
Mortgage Insurance on a Conventional loan typically disappears once the Loan-to-Value falls below 78%, which is a huge benefit to Conventional mortgage loan borrowers.
Borrowers of Conventional mortgage loans are not required to pay an upfront Mortgage Insurance premium, however some borrowers may elect to split their premium into an upfront portion and running portion to help ease their housing costs.
Pre-Payment Penalties
Conventional Mortgage Loans do not carry Pre-Payment Penalties.
This means that borrowers can pay off their mortgages at any time without fear of being penalized. This can a benefit to borrowers as they can take advantage of falling rates and refinance at any time.
Exhale Lending is a mortgage brokerage firm that embodies trust, transparency, and a genuine desire to help clients achieve financial serenity. With our client-centric approach, expertise, and unwavering commitment to excellence, Exhale Lending is poised to make a meaningful impact on the journey towards homeownership for individuals and families alike.
Subscribe Newsletter
Exhale Lending, L.L.C.
Equal Housing Opportunity
Office Location
Cary, NC 27511