Conventional Loans
What Are Conventional Loans?
Conventional loans are one of the most common types of home loans. They are not insured by any government agency and are often preferred by borrowers who meet the higher qualification criteria. These loans can be either conforming, meaning they adhere to the loan limits set by Fannie Mae and Freddie Mac, or non-conforming, which are often referred to as jumbo loans.
Conventional loans offer more options when it comes to loan structure, down payments, and repayment terms. At Upward Lending, we’ll help you determine whether a conventional loan is the best fit for your financial situation and homeownership goals.
Who Benefits From Conventional Loans?
Conventional loans are ideal for borrowers with strong credit scores, a reliable income, and the ability to put down at least 3-20%. They offer flexibility in terms of loan amounts, which is particularly helpful for homes in higher-priced markets. If you’re purchasing a property in Southlake or anywhere else in DFW, a conventional loan might provide you with the best balance between terms and affordability.
Advantages of Conventional Loans
Why Conventional Loans Might Be Right for You
One of the key benefits of conventional loans is their flexibility. Because these loans are not backed by government agencies, borrowers can expect:
Lower Costs: Without the need for government insurance premiums, conventional loans often have lower overall costs compared to FHA loans, especially if you can make a 20% down payment and avoid private mortgage insurance (PMI).
Customizable Terms: You can choose between fixed-rate or adjustable-rate mortgages (ARMs), as well as various loan lengths (15-year, 20-year, or 30-year).
Higher Loan Limits: Conventional loans often allow for higher loan amounts than FHA loans, making them a great option if you’re purchasing a more expensive home in Southlake or throughout the DFW area.
Fixed-Rate vs. Adjustable-Rate Conventional Loans
Choosing Between Fixed-Rate and ARM Mortgages
When applying for a conventional loan, you’ll need to decide between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). Each type of loan has its own benefits depending on your financial goals and how long you plan to stay in the home.
Fixed-Rate Mortgages: With a fixed-rate loan, your interest rate and monthly payments remain the same throughout the life of the loan. This is a great option for buyers who prefer stability and plan to stay in their home for many years.
Adjustable-Rate Mortgages (ARMs): ARMs typically offer lower interest rates for an initial period (such as 5, 7, or 10 years), after which the rate adjusts periodically. ARMs may be ideal if you plan to sell or refinance before the adjustment period, as they can offer lower upfront costs.
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