Are Conventional Home Loans the Best Option?
When purchasing a home, buyers are typically faced with deciding which type of mortgage best meets their needs. While there are multiple loan programs backed by governmental agencies like FHA or the VA, those programs may not meet a home buyer’s unique requirements. For many home buyers, the ability to tailor Conventional Home Loans often makes them the best option. When deciding which type of mortgage best suits a specific buyer, there are several factors to consider.
What is the Loan Amount?
Lenders typically refer to mortgages up to $453,100 as conforming loans, as this is the maximum loan amount for a conventional loan, often referred to as the loan limit. While that amount may be higher in some high-cost regions, lenders view these larger loans differently than loans under the maximum amount. Loans up to $453,100 are, as a rule, easier for home buyers to obtain. These conventional loans are often favored by buyers because they are available at reasonable rates and require less paperwork than FHA, VA, or other similar loan programs.
Are Fixed-Rate Mortgages Always Preferable?
For several years, lenders made it possible for buyers with lower incomes to buy homes with higher values than they would otherwise qualify for with variable rate mortgages. The idea was that by the time the rates were set to escalate, the buyers would have sufficient income to cover the increased payments. However, that did not always happen, leaving buyers scrambling to find additional income sources, refinance the properties, or sell them. Today, most lenders recommend conventional home loans with fixed rates. The payments do not change throughout the life of the mortgage.
Who Can Qualify for Conventional Loans?
Since the market collapsed in 2008, lenders have tightened their qualifications for home loans, but still work closely with buyers to identify ways to finance homes. Interest rates continue to be low, which helps prospective homeowners qualify for better homes than during times of high interest rates. However, many lenders are asking for significant down payments most people simply don’t have. Discussing the options available in Texas with a lender will help buyers determine what type of home they can afford today. Today’s home loan qualifications are complex, and finding the best lenders available will help buyers to obtain the best mortgage possible. Of course, a borrower’s credit history plays a major role in determining what types of mortgages may be offered by lenders.
What Mortgage Lengths Offer the Best Options for Buyers?
Generally, the shorter a conventional loan is, the better rates a home buyer will get. In other words, the interest rate and total costs of a fifteen-year fixed-rate mortgage will be lower than the costs of a thirty-year mortgage. The downside is, of course, that the payments are significantly higher with the shorter term option. Buyers must balance their ability to pay with other goals to determine if it’s better to purchase a less expensive home and pay it off sooner or opt for a more expensive property knowing it will take longer to pay off.
Anyone considering purchasing a home is strongly advised to contact a mortgage lending professional for advice. The important point is that, even in a relatively tight mortgage market, loans are being approved every day. With a little persistence and help from a quality lender, buyers are often able to get into the home they need and want.
For details or additional information regarding a conventional / conforming loan, contact our Home Loan Specialists at 281-949-7218.