FirstBank FTHBPacket FinalNoBleeds - Flipbook - Page 14
DEFINING THE TERMS
THE BASICS OF MORTGAGE LOANS
With any home purchase, there are a lot of things to learn – including
the differences between your mortgage loan options. Knowing how
these different loans work in general will help you understand the
mortgage process more fully and help you decide on a loan that’s right
for you and your unique financial situation.
CONVENTIONAL MORTGAGE LOANS
Simply put, a conventional loan is a mortgage that is
not insured or guaranteed by any government agency
– like the Federal Housing administration (FHA), U.S.
Department of Veterans Affairs (VA), or the USDA
Rural Housing Service. These loans are available
through private lenders such as banks, credit unions
or mortgage companies.
People who choose a conventional mortgage often
have more money available for a down payment,
which can result in lower monthly payments. Costs
for these loans also usually include origination fees,
appraisal fees and mortgage insurance. Most who go
this route for their mortgage have a stable financial
foundation and are unlikely to default on their loan.
Conventional mortgages most commonly have terms
of 15, 20 or 30 years.
Minimum credit score and down payment: 620,
but 700 is the minimum for a good mortgage
rate and 740 is the minimum for the best rates.
Traditionally, a conventional loan required a 20%
down payment. Lenders can now offer lower down
payments to compete with FHA loans; down payment
requirements vary for each lender and your individual
credit history. Conventional loans do offer programs
that require a 3% down payment for low-to-moderate
income and/or first-time home buyer applicants.