When ever someone realizes I know about home loans, I get asked the same questions over and over - 'What is a conventional home loan?', 'What's the difference?' 'What is a conventional home loan good for? Is it better?'. Clearly, the government isn't doing enough to try to educate its masses on what loans are!
If you, too, are asking 'What is a conventional home loan', then you've come to the right place.
So, What is a Conventional Home Loan?
Many loans are really complicated so you should not feel odd if you are not sure what you are dealing with. You won't have to ask what a conventional home loan is again and should learn to be patient.
A conventional home loan is any kind of loan that the agreement is not backed fully by a VA or protected by the FHA. Those are really the basics of a conventional loan and where they end.
If you are still not sure then don't worry because we are still going to go into a conventional home loan a bit more here.
There are several different types of conventional home loans, as the term is fairly broad, and covers quite a bit.
For instance: Fixed Rate Mortgage (FRM)
This fixed rate conventional home loan is a very common one and the borrower will have a locked in interest rate for the life of the loan.
With this, you pay the principle on the loan for the amount you borrowed. Then, the interest rate that was locked into, never changes until the loan is paid off in full. This means every month, the amount of your mortgage payment never changes.
Still asking 'what is a conventional home loan', or just haven't answered your questions? There's more!
Conventional home loan type Two: The conforming home loan
In this case, you the borrower and lender would agree to follow rules outlined by an organization operated by the federal government. For instance, the two most common include Freddie Mac and Fannie Mae. The huge difference here is that these loans do not have to be approved or denied. Instead, they are organizations that have money to loan.
It will benefit the lender more to have this, because the lender can sell your loan to other companies and receive the money that you would pay to them later. So they get the money faster.
There is the: Jumbo Home Loans
With this loan, the concept is simple. Typically, these loans are quite large, meaning they go beyond normal purchase limits outlined by Freddie Mac or Fannie Mae. However, the interest rates are often much higher and to get the loan, a private investor is involved.
The Bottom Line
We hope that this article has helped you get a basic understanding - no more asking 'What is a conventional home loan'? for you!
About the Author:
What is a Conventional Home Loan? The most stable and basic of loans, they're actually quite good! Head to Low Income Home Loan and find out if you qualify for one now, safely and securely. It's painless, isn't it?
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