Conventional Mortgages – Are They Right for You?

    Long-considered a standard in the Massachusetts mortgage industry, a conventional home loan is just what it sounds like, a “standard,” or “normal” loan. Conventional mortgage loans are the most common loan that home buyers secure when purchasing a new home.
    If you’re thinking about applying for a conventional mortgage, here are some pros and cons to evaluate:

    Pros:

    • If you have a strong credit report and a score in the mid 700s this could save you money in the long run with a competitive interest rate.
    • Since a mortgage is a secure debt, meaning the lender can take your home if you default on payments, these loans are usually offered at lower interest rates than unsecured loans, such as credit cards.
    • Equity builds faster because of the higher down payment (up to 20%) you’ll make upfront.
    • Lenders may be more likely to be flexible with terms and conditions than with a government-backed loan like an FHA or VA loan which need to follow government guidelines.

    Cons: 

    • When you go for a conventional loan, your total debt plays into your approval. The actual eligibility amount may fluctuate, but expect to be denied if your debt to income ratio is more than 45%.
    • If you’re not sure if you’ll be living in your home 10 years from now, it may not be a good option since these are the kinds of loans that people pay off.
    • If you don’t meet the minimum down payment requirement, you may have to pay for private mortgage insurance (PMI).
    • While the lending decision is completely in the underwriter’s hands, if you’ve had a previous foreclosure or bankruptcy, it can likely decrease your chances of getting a conventional loan approved.

    Is a conventional mortgage your best bet to land the Boston home of your dreams? We’re here to answer your questions. Contact us to learn more.

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