Loan Programs

Conventional Loans

Conventional Loans

When loans are not guaranteed or not coverage protected by the government, they are known as conventional loans. Of course, as the name posits, they are regular and more popular than other types of loans available in the financial institution marketplace.

Their popularity mostly stems from their open-ended and pliable stat, but there is an obvious downside to this flexibility. Anything could go wrong and when this happens with conventional loans, there is no protection from the government. This means that the financial institution could suffer financial losses.

Characteristics of Conventional Loans

    It is difficult to pre-qualify for a conventional loan.

    The lender is the one who bears the risk should the loan repayment process go awry in the first month or a few or many months down the line.

    Should you default on your conventional loan, the financial institution bears the financial loss but even at that, your property goes on a foreclosure or short sale to cushion the loss.

Types of Conventional Loans

There are different types of conventional loans and they are:

  • Conforming Conventional Loans: When a conventional loan follows the guidelines set by the Fannie Mae and Freddie Mac as regards the maximum loan amount (this maximum may change annually), it is called a conforming conventional loan because the lender follows the guidelines stipulated by these two Agencies.
  • Non-conforming Conventional Loans: Conventional loans that are above the loan limits set by Fannie Mae and Freddie Mac. They are usually issued by private financial lenders and are best known as jumbo loans.
    Are you interested in securing a conventional loan, either conforming or non-conforming? Come to us at Supreme Lending Willmar and we will walk you through qualifying for one and getting a conventional loan that you can afford.

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Merits of Conventional Loans

Conventional loans, bar the difficulty in qualifying for it on the borrower’s angle and the financial risk involved on the lender’s angle, have their merits. Some of them are listed below:

  • The conventional loan processing duration is faster than the time spent in processing non-conventional loans.
  • The interest rates are cheaper.
  • The private mortgage insurance (PMI) is minimal.
  • You have different options to choose from with respect to the initial down payment, starting at 3% of the value of the sale price of the home.
  • You get a long period for repayment as a fixed rate mortgage (instead of an adjustable rate mortgage), terms of 10-30 years.