A conventional loan is simply a mortgage loan that is not backed by the federal government. Basically, any loan that is not owned by FHA, VA or USDA is a conventional loan. Most conventional loans are owned by lending institutions Fannie Mae and Freddie Mac.
Conventional loans, also often referred to as conforming loans, offer distinct advantages over government-backed loans such as:
Conventional refinancing options are popular with consumers with strong credit history, good income and good assets. For this type of borrower, a conventional refinance can be a great option.
Talk to one of our experts to see if you qualify for a conventional refinance.
Generally, choosing between a conventional and FHA refinance for your home is the frequent, most common dilemma that faces many homeowners.
Here are some quick facts to know when deciding between these two programs:
To find out more about the differences between FHA and conventional loans, talk to one of our knowledgeable experts.
FHA and conventional refinance loans differ significantly by mortgage rate. The FHA 30-Year Fixed mortgage rate is generally lower than the conventional rate. However, the rate itself shouldn’t be weighed in isolation. FHA usually requires mortgage insurance for the life of the loan, which increases the entire loan cost significantly.
So even though you get a better base rate with FHA, the overall costs of a conventional loan might be lower.
FHA also requires an upfront mortgage insurance premium – which raised to to 1.75 percent of your loan amount as of January 2013. This means that the cost-benefit of using an FHA loan over conventional might not be as straightforward as it appears. As with many other financial decisions, using a conventional refinance is a cost-benefit calculation for you and your home.
A conventional loan is typically best for those with a minimum credit score of 660 to 680, have good equity in their home, and can prove current income and assets.
Unlike government-backed loans, you can use a conventional loan to refinance a second home or rental property. You can also open a bigger loan than what you currently owe which gives you cash at closing.
The 2013 conforming loan limit is $417,000 for most areas, but can be much higher for high-cost locales. For instance, in Los Angeles, California, the limit is $625,500. In Seattle, Washington, the limit is $506,000. Speak to a loan officer to find out the limit in your area.
If you don’t have enough equity in your home, you still may be eligible for a conventional refinance by using the HARP program.
MortgageRefinanceRates.org can help sort out the conventional versus FHA decision making process for you quite easily. By connecting you to one of our respected lenders, you will quickly get the best answers to your questions. We will match your loan conditions with a lender who can help you immediately. The mortgage professional will contact you and walk you through the process. Representatives are standing by to assist you.