Discover Why Conventional Loans Continue to Be Popular Options for Home Buyers
While the percentage of people owning their own homes has dipped slightly in recent years, the majority of people still view homeownership as an advantage. In Wisconsin, homeownership in 2017 was slightly under 66 percent. To purchase homes, the vast majority of people must obtain a mortgage. Even though there are several types of mortgages available, people meeting the qualifications will generally opt for a conventional mortgage.
What's the Difference Between Conventional Mortgages and Other Mortgage Types?
The biggest single difference between conventional mortgages and FHA or VA loans is the requirement for mortgage insurance. Because most government-sponsored mortgage programs require some level of mortgage insurance, those loans tend to cost more in the long run than conventional loans. However, even some borrowers who qualify for conventional loans end up paying mortgage insurance if they are not able to put a full 20 percent of the purchase price down. Even when conventional loans require mortgage insurance, the total cost to the consumer is likely to be lower than financing the same amount of money using a federally insured mortgage.
If They Cost More, Why Do People Use FHA Loans?
A Home Loan professional will generally review a borrower's credit history, their income, and the price of the selected home to determine eligibility for a mortgage. Buyers with better credit ratings, more solid work histories, and lower payment-to-debt ratios will generally be steered to a conventional mortgage. The approval process is simpler than an FHA or VA loan and, as mentioned earlier, the monthly payment will generally be lower.
On the other hand, anyone with a lower credit score will have a more difficult time obtaining conventional financing. Government-insured mortgages are available to purchasers with lower credit scores, and there are numerous programs available to mitigate the consequences of past credit issues.
Explore The Different Conventional Loan Options
Since there are several types of Conventional Loans, the actual process for determining which loan to take advantage of can be somewhat complicated. There are the typical conforming loans, non-conforming loans, jumbo loans, and others to consider. A qualified lender will gladly work with a borrower to find the ideal loan package to fit their needs. If you're considering buying a home, it's worth the time investment to discuss loan options with a lending professional before shopping.