Conventional Mortgages—Are They Right For You?

Long-considered a standard in the North Shore mortgage industry, a conventional home loan is just what it sounds like, a “standard,” or “normal” loan. Conventional mortgage loans are the most common loan that home buyers secure when purchasing a new home.

If you’re thinking about applying for a conventional mortgage, here are some pros and cons to evaluate:

Pros:

• If you have a strong credit report and a score in the mid 700s this could save you money in the long run with a competitive interest rate.
• Since a mortgage is a secure debt, meaning the lender can take your home if you default on payments, these loans are usually offered at lower interest rates than unsecured loans, such as credit cards. 
• Equity builds faster because of the higher down payment (up to 20%) you’ll make upfront.
• Lenders may be more likely to be flexible with terms and conditions than with a government-backed loan like an FHA or VA loan which need to follow government guidelines. 

Cons: 

• When you go for a conventional loan, your total debt plays into your approval. The actual eligibility amount may fluctuate, but expect to be denied if your debt to income ratio is more than 45%.
• If you’re not sure if you’ll be living in your home 10 years from now, it may not be a good option since these are the kinds of loans that people pay off.
• If you don’t meet the minimum down payment requirement, you may have to pay for private mortgage insurance (PMI).
• While the lending decision is completely in the underwriter’s hands, if you’ve had a previous foreclosure or bankruptcy, it can likely decrease your chances of getting a conventional loan approved.

Is a conventional mortgage your best bet to land the Melrose home of your dreams? We’re here to answer your questions.