When you apply for a home loan, you have the option of choosing between a government-backed mortgage. like an FHA loan, or a conventional mortgage. Rather than being insured by the federal government, conventional mortgages are insured by a private company.
Because they do not have government backing, conventional home loans are a higher risk, which means you can expect stricter income and credit requirements. If you qualify, conventional loans offer many advantages, and they are often more affordable.
Conventional mortgages are often the best choice for borrowers who have excellent credit and a down payment of at least 20 percent. These loans can be used to buy a primary home, second home or investment property, unlike FHA or VA loans, which may only be used for a primary home. Conventional loans are available with many terms ranging from one year to 30 years, and they are available as a fixed-rate or adjustable-rate mortgage.
The advantages of a conventional mortgage include:
Keep in mind, conventional mortgages are usually harder to obtain than a government-backed loan.
We will want to see the following:
If you qualify, there is a good chance a conventional loan is a better option than an FHA loan. FHA loans have become much more expensive over the last few years with rising mortgage insurance premiums.
If you are trying to choose between a government-insured mortgage and a conventional home loan, it can help to think about your priorities. If you have great credit and can put down at least 20 percent, the conventional loan option will save you more money. If you want to pay less up front in exchange for a higher monthly payment, a government-insured loan may be a better choice.