You will undoubtedly be introduced to many financial terms that are new to you when you apply for a mortgage. When you begin your process of hunting for great loan terms, you will initially come across loan program options like conventional, FHA, VA and others. What is a conventional loan and how does it differ from the other options available to you?
FHA, VA and many other loan programs are backed by the federal government. Lenders always face the risk of a financial loss if the borrower defaults on the loan. Government-backed loans give the lenders insurance that they will not experience this financial loss. This allows lenders to have more lenient lending guidelines under these specific programs.
A conventional loan, on the other hand, is a broad term that describes all mortgages not insured by the government. Notably, the majority of the mortgages in the United States are conventional home loans. Some types of conventional loans are non-conforming loans, jumbo loans, Fannie Mae loans and Freddie Mac loans. Keep in mind that these loans are available as interest-only loans, adjustable-rate loans and fixed-rate loans with several term options.
There are many loan programs available to today’s mortgage applicants. This means that many applicants will qualify for several programs. It is important that you understand the pros and cons of the mortgage programs that you qualify for before you finalize your selection and proceed with a formal application. Our associates at MortgageDepot are always happy to answer our clients’ questions, and we will stand by you as you explore the possibilities.
Connect with one of our loan consultants to learn more.