Now that we have talked about government backed loans, let’s talk about conventional fixed rate loans.
A fixed rate is exactly that. Fixed. It refers to the interest rate meaning it will not change through the entirety of your mortgage. Conventional refers to the fact that the mortgage “conforms” to set guidelines based on the size of the loan and your finances.
According to U.S. Bank, conventional mortgages usually have lower interest rates than FHA and VA loans. The two options come with a conventional fixed rate mortgage are to choose either 30 years or 15 & 20 years. This refers to the length of time you have to pay off the loan. Obviously your monthly payments will be lower with 30 years but you will end up paying more interest. With 15 & 20 year mortgages you can build equity faster and of course you don’t pay as much interest. The downfall to this though is that your monthly payment is higher.
As we have previously discussed with the other loans, there are credit and down payment requirements. Most conventional loans require 5% down but sometimes the requirement is 20% or more. The credit score required is 740 or higher, both of these requirements stated by U.S. Bank. as well.
So with these facts, when choosing a conventional fixed rate loan, it is all about weighing out your options and going with the one that is best for you. If you prefer a lower down payment and if you don’t have the best of credit scores, I would recommend going with one of the previous discussed loans.