When you’re starting out on your home buying search, the first thing most people are concerned with is how they are going to pay for the home. Not everyone can buy a home with cash, so the first option would be financing. There are multiple ways to finance a home with a lender but the most common option is a conventional loan. The main difference between a conventional loan and other common loans like FHA or VA loans, is that conventional loans are not backed by the government.

Types of Conventional Loans

A non-conforming loan usually has a larger limit than conforming loans and also can be known as jumbo mortgages. Since these loans are above the limits set by Fannie Mae and Freddie Mac, they don’t “conform” so they are called non-conforming loans, but they do vary based on county so it is important to research the limits in the area in which you intend to purchase.

If you are looking for a loan for a specific purpose such as investment, you might consider researching portfolio loans. Portfolio mortgages are quite a bit different than other conventional loans so their terms and features can work out for those that may not qualify for a typical loan. This means that if you happen to have stocks and bonds that can be kept in portfolio for the life of a loan, you may qualify for this type of loan even if you don’t qualify for a typical loan.

The last type of conventional loan you may want to consider if you have a lower credit score is a subprime mortgage. The interest rate and fees are usually higher, but they do give those with less than perfect credit a chance to still purchase a home. These come with special regulations created by the government but they are not backed by the government so they are still considered conventional loans.

What Should I Choose?

Your financial situation is going to play a big role in whether or not you will be approved, so it’s important to think about the overall situation before moving forward with a lender. If you are new on the search to find a home or securing financing, it’s a good idea to start thinking about your financial obligations and ability to come up with a down payment. If you are able to come up with a large down payment, you may have better options in regard to your interest rate to keep your monthly payments as low as possible.

The last thing to take into account when determining the type of loan that works best for you is why you are buying a home. If you are purchasing for the first time versus if you are looking for an investment, the type of loan is going to change based on your situation. If you want to stay in the home until it’s paid off, you’ll want to make sure your payments are consistent over the life of the loan as well unless you think you’ll be refinancing at some point.

Contact Us Today!

We want to assist you on your financing needs so don’t hesitate to reach out. Whether you are just starting your search or have already narrowed it down to the home you want, we want to help figure out the best options for you. Reach out to the team at Commonwealth Mortgage Corp today!