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In contrast to government-guaranteed mortgages, conventional mortgage loans are not backed by the government. In most cases, however, private lenders back the loan and the borrower is responsible for covering its insurance.
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Everything You Should Know About Conventional Loan
Conventional loans are so common that you've probably heard of them before. They may even have been recommended to you by your lender!
But how do they work? What are the pros and cons of their loan option compared to the rest? Here's what you need to know about conventional loans so you can make an informed decision.
What Is a Conventional Loan?
• In contrast to government-guaranteed mortgages, conventional mortgage loans are not backed by the government. In most cases, however, private lenders back the loan and the borrower is responsible for covering its insurance.
• Government-sponsored financing is rarer than conventional loans. By a wide margin, conventional loans made up 74% of all new home sales in the first quarter of this year.
• The federal government does not insure conventional loans, so they are riskier, though they offer more flexibility.
How do Conventional Loans and Government Loans differ?
• Understand the difference between conventional and government-backed loans when thinking about your mortgage options.
• Veterans are able to get VA loans, which are government-backed, as well as FHA loans, which are offered by the Federal Housing Administration (FHA). In addition to FHA funding, VA loans are guaranteed by the Veterans Administration.
• You must pay MIP (mortgage insurance premium) with an FHA loan. 3.5% down is required. You may be liable for loan defaults if the FHA makes money from MIP.
A Conventional Loan: How Do You Qualify?
• Meeting with a lender is the first step to qualifying for a conventional loan. If you're in the home-buying process, we recommend you contact Pierpoint Mortgage, one of the best Denver Mortgage Company, when you plan to meet with a lender. A lender will ask for documentation like recent pay stubs, tax returns, and bank statements. Mortgage lenders want to be sure you have a steady income and can make your monthly mortgage payments on time.
• Conventional loans require a down payment as well. With a conventional loan, you can put only 3% down, but we recommend a minimum of 10%. You could avoid PMI by paying 20%, though!
Conventional Loans Have Several Benefits
• Private mortgage insurance (PMI) reduced to 3%
• Quick loan approvals
• Different down payment options, starting at 3% of the purchase price
• Fixed-rate mortgages ranging from 10 to 30 years
• Fixed-rate mortgages ranging from 10 to 30 years
Contact Us:
PierPoint Mortgage
+1 720-549-5880
333 W Colfax Ave, Denver, CO 80204, United States
https://pierpointmortgage.com/locations/mortgage-broker-colorado-denver/
