What Are Conventional Loans?
Conventional loans are loans that are not guaranteed or backed by the government. These loans come from private lenders, and the borrower typically insures them through Private Mortgage Insurance. Conventional loans are the most popular type of mortgage throughout the U.S, which is understandable given its diversity and accessibility. Conventional loans have a relatively fast processing time, a variety of down payment options, various term lengths available, and possible reduction of your PMI (Private Mortgage Insurance). All of these are reasons why many people choose to get a conventional loan. At DC Lending LLC, our Vancouver, WA, loan officers are happy to assist you in finding the perfect loan option. We help in explaining all the details and benefits each loan has to offer.
Types of Conventional Loans
When you are considering a conventional loan, it is also essential to think about what kind of mortgage rate you want. There is an adjustable-rate mortgage (ARM) or a fixed-rate mortgage (FRM). Adjustable-rate mortgages are a good option for specific scenarios, although they are riskier than Fixed Rate Mortgages. Your loan officer will evaluate both options and discuss the pros and cons with you.
Fixed-rate mortgages lock you in at the current rate and don’t change for the life of the loan. These rates vary every day, multiple times a day. If you are choosing to select a fixed-rate mortgage, it is essential to work closely with your loan officer to lock in a rate when the numbers are favorable. You can only lock in a rate if you are already pre-approved, have a property selected, and are under contract for that property. At DC Lending LLC, we are always happy to assist our customers in finding the perfect loan. We are with you through the entire process to ensure everything runs smoothly.
How To Get A Conventional Loan
After you’ve decided that a conventional loan is the best option for you, we will help you in gathering all of the necessary paperwork. The primary documentation needed for a conventional loan includes financial information like pay stubs, tax returns, or bank statements. The lender needs proof that you will be able to make all of your mortgage payments. Conventional loans depend on your credit. Typically a score of 620 or above is needed to qualify for this type of loan. And with most other types of investments, there is down payment required. It is ubiquitous for people to assume that 20% is the necessary amount needed to get a home loan. But with a conventional loan, you can put down as little as 3%. But the more down you can provide, the better. If you can put down 20%, you will avoid PMI. It is fine to put less down, but you will be required to pay for insurance (PMI) so that your lender is protected.
Conventional Loan Term Lengths
Another aspect of a conventional loan to consider is the term length. Most people think of either a 15-year or 30-year term. There are other term lengths available, but 15 and 30 are the most popular. It can be a difficult decision to decide between 15 or 30 because they both offer particular advantages and certain drawbacks. With a 15 year term, your monthly payments are higher, but you can save a lot of money in interest by paying the home off sooner. With a 30 year term, your monthly payments are a lot lower, but it will take you twice as long to pay the house off. It all depends on your financial situation on which term length will be the best fit for you. Our loan officers have years of experience helping people get conventional loans in Vancouver, WA. We are happy to inform and assist you in selecting the right option.