It doesn’t matter if you’re buying your first home or your fourth home, every homeowner will have to answer the daunting question: What home loan do I choose?
Both loan types will have their own advantages and disadvantages to the borrower.
To help you get started, we’ll guide you through the differences of these two popular home loans.
What Are Conventional Loans?
Conventional loans are not secured by an established government program like the Federal Housing Administration (FHA), Department of Agriculture (USDA) or Department of Veterans’ Affairs (VA). Instead, they’re offered by private lenders and will generally follow more strict requirements compared to other loan types.
They’re ideal for borrowers who already have excellent credit. If you are currently at a good economic standing and can provide a larger down payment, the process shouldn’t be hard for you. Although it may be hard to qualify for this loan type, there are added benefits such as flexibility in terms of property that you can purchase and the chance to significantly reduce your mortgage insurance.
Conventional loans will fall under two types: fixed-rate mortgages and adjustable rate mortgages.
To put it in layman’s terms fixed-rate mortgages will have an interest rate that never changes. Even if your property taxes start to rise or your homeowners’ premium increases, the monthly payment for your loan will always be the same.