Everything You Should Know About Conventional Mortgage Loans


When you begin the home buying process, you are immediately plagued with the question of which loan would be the best option for your financial situation. With local Orlando mortgage lenders offering a variety of different home loans, it can be overwhelming trying to make this decision.

So, to help provide some insight, your local lender with the Harper Mortgage Team has listed everything you need to know about one of the most common mortgage types known as conventional loans.


Conventional Loans 

Two of the most common types of loans are conventional and government-backed loans. A government-backed loan is one where the government subsidies loans to local lenders so they are able to offer loans with a low down payment requirement. These loans include an FHA loan, VA loan, and a USDA loan. 

A conventional loan, however, is not government subsidized, which means the loans are not insured by the government and it follows the Fannie Mae and Freddie Mac guidelines, which sets a maximum borrowing limit of $484,350. The interest rates for a conventional loan are usually a little higher than a government-backed loan since they are not subsidized. However, a conventional loan could end up saving you more money in the long run because you will not be required to pay for private mortgage insurance (PMI).

PMI is charged by Orlando mortgage lenders to borrowers who pay less than 20% of their down payment. This is a separate fee that is added on to the borrower’s monthly payments to protect the lender in case the borrower defaults on their mortgage. This fee does not protect the borrower and since government-backed loans either offer a very low down payment or do not offer one at all, most borrowers have to pay for PMI. With a conventional loan, the borrower can avoid having to pay for this additional fee, which means they could end up saving more money over time.

Also, if you have a conventional mortgage and need to obtain PMI, you have the option of dropping this fee once your Loan-To-Value (LTV) ratio is 80%. You usually do not get the option to drop the insurance if you have a government-backed loan.

As for qualification requirements for a conventional home loan, you will need to have a stable income and a credit score of at least 620. Also, make sure you have been with your current employer for at least two years and that you do not have an outrageous amount of debt.


Contact Us

For more information on conventional mortgages or if you would like to apply for an Orlando home loan, please contact the Harper Mortgage Team at 407-614-3095.