What is conventional? A conventional mortgage is basically a form of mortgage loan that is not guaranteed or insured by the federal government. Rather, the mortgage is backed by various private lenders, and the borrower's insurance against the risk of default is generally paid by the borrower. The rates of interest in this loan are variable, which mean that they are influenced by market factors such as inflation and change in market rates for mortgage loans. Lenders provide their customers with conventional mortgages at fixed rates.
You can apply for a conventional loan from any lender; there is no limit on how many lenders you can get your loan from or what kind of mortgage you can get. Conventional loans are available for all kinds of borrowers including first time home buyers. Although you can get a mortgage even if you have a bad credit history or an unstable income, this will depend on the lender and your individual eligibility requirements. Your financial situation may already be bad enough to be unable to obtain a conventional loan from traditional lenders; therefore, you can also look at alternative lenders who offer better interest rates and other mortgage lending options such as fixed rate mortgages.
Conventional mortgage payment structures remain the same for the next thirty years. You can make your payment in three ways: biweekly, twice monthly, or once annually. You also have the choice between making your payment late and early. If you choose to make your payment late, your interest rate will be increased by one percent per month. Early payment charges will be applied on your remaining balance. If you pay early, your payment is cut by one percent.
Conventional loans include: Cash mortgages, line of credit, signature loan, unsecured debt, flexible rate mortgages, and other conventional loans. With cash mortgages you have the flexibility to choose payment dates and repayment amounts. You also have more control over your budget and can often choose to make extra payments toward your mortgage payment each month.
Many factors will affect your eligibility for this type of mortgage. Your credit score is the main determinant of whether you qualify or not. If you do not qualify, you might want to compare your score with those requirements in order to ensure that you meet the minimum standard for conforming mortgage. Your income and assets are also significant determining factors.
Once you have determined your eligibility, you can begin looking at the different kinds of mortgage to find the one that is right for you. You can choose a government-backed loan if your score and income are adequate. You can also choose a private lending product if your score and assets qualify you for the best mortgage available. The terms of repayment will vary between these two options.
One disadvantage that you must be aware of is that most conventional loans cannot be consolidated into a single loan. The interest rate on these loans will be high for the first several years. The longer you remain in debt, the more money your monthly payment will be. In most cases, borrowers must commit to paying off at least the primary loan for the first few years in order to consolidate. This can cause financial hardship and make it difficult to qualify for other conventional loans after the initial years of repayment.
It is important that you are aware of your options if you are interested in getting a conventional loan. A good credit score is necessary in order to qualify for most conventional loans and it is necessary to make timely payments. If you have been able to secure a government-backed mortgage but do not have a good credit score, you should still check out some of the private lending products available to ensure that you get the lowest rates available.