Conventional Mortgages

Conventional mortgages are some of the most popular mortgage options on the market. While they conform to the guidelines set forth by quasi-governmental agencies, Fannie Mae and Freddie Mac, they are neither insured nor guaranteed by the federal government. Options for conventional (also called “conforming”) mortgages include both fixed-rate and adjustable rate mortgages.

Fixed-Rate Mortgages

One of the most common types of loan programs, fixed-rate mortgages are structured or amortized, so they can be completely paid off by the end of the loan term or at any time without penalty. Available in terms ranging from 10 to 30 years, the most popular types of fixed-rate mortgages are:

30-Year Fixed

• Lower monthly payments than 15-year fixed loans
• Monthly principal and interest payments never change over the entire life of the loan
• Amortized to be paid off in 30 years

15-Year Fixed

• Lower interest rates than 30-year fixed loans
• Monthly principal and interest payments never change over the entire life of the loan 
• Amortized to be paid off in 15 years

Adjustable Rate Mortgages (ARMs)

• Structured with interest rates that may vary during the loan’s term
• Typically has a fixed interest rate for an initial period and then adjusts based on current market conditions
• Lower initial rates than fixed-rate mortgages 
• Usually amortized over a period of 30 years with the initial rate being fixed for a shorter period, such as five or seven years

Conventional Mortgage Benefits

Conventional mortgages have several key benefits. For example, while you can put as little as 3% down, there is no mortgage insurance added to your payment with 20% down. Furthermore, because payments stay the same from month to month, you can refinance and take advantage of lower rates regardless of whether interest rates climb, or housing prices fall. 

Borrowers with established savings can also benefit from conventional mortgages. Keeping emergency funds in a savings account adds security to your finances, but it also allow you to trade flexibility for predictability. This is because you must make the exact payments every month and must refinance to take advantage of falling interest rates. 

What’s Needed to Qualify?

There are several ways to qualify for a conventional mortgage. Employment history, credit scores, down payment, and debt ratios are some of the important areas lenders consider when determining your eligibility. Typically, minimum requirements include two years of solid employment history, a credit score of 620 or more, and a minimum of a 3% down payment. In order to qualify, you must have a debt-to-income ratio of less than 50%. The lower your debt-to-equity ratio, the better your chance of qualifying, since you will be considered a less risky borrower. 

Lending Trust and Experience

Since 1994, the professionals at Butler Mortgage have worked with both first-time and experienced buyers looking to purchase a home in Central Florida. Let us help you find the right loan solution by calling 407-931-3800 or filling out our free consultation form online.