Conventional Austin Mortgage

FAQs – Conventional Mortgage

 

Austin Mortgage RatesAustin Mortgage offers several types of conventional mortgages to qualified borrowers in the Austin area and nationwide. Whether you are looking for a conventional loan with a fixed-rate or a conventional loan with an adjustable-rate, our recommended experts work with borrowers one-on-one to find programs that suit all of their financial needs.

 

What exactly is a conventional mortgage?

Conventional mortgages are best defined as a type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. Conventional mortgages may have a fixed or adjustable-rate and require a down payment that can range from 5-20% of the total loan amount.

 

Are conventional mortgages common?

Yes, conventional mortgages are fairly 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.
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  • An FHA loan can be obtained with a minimal down payment of 3.5%, while a conventional mortgage requires a minimal down payment of at least 5%.
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  • It is also 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.
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  • However, if the qualified borrower of a conventional loan agrees to make a down payment of 20% or more, the complete down payment is may be paid by a relative—if the borrower chooses to put less than 20% down, then at least 5% of the required down payment must come from that borrowers own personal funds.

 

What are the major benefits of using a conventional loan?

Well, there are several benefits to using a conventional loan. One major benefit is the fact that FHA loans require borrowers to pay a nonrefundable premium equivalent to 1% of the total loan amount and a monthly payment toward their mortgage insurance. The borrower must maintain the mortgage insurance for the greater of 5 years or until their loan amount has reached 80%. However, with conventional financing, the burden of mortgage insurance can be removed as soon as the loan amount has reached 80% of the sales price making a conventional loan and extremely attractive option to borrowers with enough for a down payment.