Austin Conventional Loan
Conventional Loan FAQ
Our mortgage experts work with borrowers one-on-one to find programs that suit their financial needs.
What is a conventional mortgage?
Conventional mortgages are best defined as a type of loan in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. Conventional mortgages may require a down payment that typically ranges from 5-20% of the total loan amount.
Are conventional mortgages common?
Yes, conventional mortgages are common. Depending on the current market conditions and consumer trends, about 35-50% of all mortgages are conventional mortgages.
What are the differences between a conventional mortgage and an FHA loan?
Although conventional mortgages and FHA loans both result in you borrowing money from a lending institution, there are several differences. A few of these differences include:
- An FHA loan is guaranteed through the Federal Housing Administration, while a conventional mortgage is not.
- An FHA loan can be obtained with a minimum down payment of 3.5%, while a conventional mortgage typically requires a minimum down payment of 5%.
- It is important to note that an FHA loan allows the borrower to obtain 100% of the funding used for a down payment from a down-payment assistance program, relative or government agency.
What are the major benefits of using a conventional loan?
One major benefit is FHA loans require borrowers to pay a nonrefundable premium equivalent to a percent of the total loan amount and a monthly payment toward their mortgage insurance. However, with conventional financing, the burden of mortgage insurance can be removed, typically when the loan amount has reached 80% of the sales price, making a conventional loan and extremely attractive option to borrowers with enough money for a down payment.