Home Loans with No Interest Surprises and Low Fixed Rates
As you’re searching for a home loan, you’ll likely run into mortgages that feature terms like “conventional,” “fixed-rate,” or both. While these types of mortgages are some of the most common, it might be difficult to understand just what they entail at first—and whether they are right for you. At Landmark National Bank, our team of mortgage specialists have detailed all you need to know about conventional fixed-rate mortgages below.
What is a conventional mortgage loan?
Conventional mortgage loans are home loans that are not insured by the federal government, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Department of Agriculture (USDA). These types of home loans typically meet the down payment and income requirements set by Fannie Mae and Freddie Mac and adhere to the loan limits set by the Federal Housing Finance Administration (FHFA). Due to these restrictions, typical conventional loans are known as “conforming” loans. There are also “non-conforming” conventional loans, such as jumbo loans.
With a conventional mortgage loan, borrowers are required to have a strong FICO credit score—620 to meet minimum requirements, but 740 and up to get the best rates—as well as a stable income, strong employment history, and the ability to show income to repay the new home loan and your existing obligations.
The minimum down payment needed for a conventional mortgage loan is 3%. However, borrowers with lower credit scores or higher debt-to-income ratios (DTIs) may be required to put down more. If a borrower puts down less than 20% on a conventional mortgage, they will be required to pay for private mortgage insurance (PMI).
What is a fixed-rate mortgage loan?
A fixed-rate mortgage loan features a set interest rate that doesn’t change over the course of the home loan. Although monthly principal and interest payments could vary, the total balance of the loan remains the same. This gives homeowners a budgeting advantage.
Conventional Fixed-Rate Mortgage Loan Lengths
Conventional fixed-rate mortgages typically feature loan lengths between 10 and 30 years:
30-Year Loan Length
30-year conventional fixed-rate mortgage loans feature low monthly payments. But, since the payments are spread out over 30 years, the borrower will pay more interest over the course of the loan than a loan with a shorter length.
15- to 20-Year Loan Lengths
15- to 20-year conventional fixed-rate mortgage loans feature higher monthly payments, but they can help borrowers pay off their loans and build equity faster without spending as much in interest as a 30-year home loan.
The Benefits of a Conventional Fixed-Rate Mortgage Loan
Conventional fixed-rate mortgage loans feature a lot of benefits for borrowers who qualify, including:
- Fixed interest rates throughout the life of the loan
- Lower interest rates and Annual Percentage Rates (APR) than other fixed-rate loans
- Less documentation than other types of mortgage loans, such as FHA or VA loans
- You can cancel PMI once you’ve gained 20 percent equity in your home
- Refinancing options
Frequently Asked Questions
How is a conventional mortgage loan different from an FHA loan?
The biggest difference between a conventional mortgage loan and an FHA loan is that an FHA loan is backed by the Federal Housing Authority—a government agency—while a private lending institution, like a bank or credit union, provides a conventional mortgage loan.
An FHA loan will typically have a lower credit score requirement and lower down payment but higher long-term costs compared to a conventional mortgage. FHA loans are typically best for borrowers with lower credit scores or limited savings.
Who is eligible for a conventional mortgage loan?
Those looking to get a conventional mortgage loan should have:
- A strong FICO credit score—620 minimum, ideally 740 and up
- Stable income
- Strong employment history
- Evidence of current income to repay the loan
If you’re unable to meet minimum requirements, you may look into getting an FHA loan.
Find Out if a Conventional Fixed-Rate Mortgage Loan is Right For You
As one of the top mortgage lenders, Landmark National Bank is ready to help you get the home loan you need at competitive rates. Contact one of our mortgage specialists today to learn more about conventional fixed-rate mortgage requirements, qualifications, and today’s current conforming conventional loan limits. You can also check out our Quick Rate Calculator!