A mortgage broker is able to broker loans through many different banks, while a bank is limited on the array of products and services they carry. However, both usually offer conventional loans.
Conventional loans offer a safe variety of loans that fit most homeowner’s needs.
How are they different?
A conventional loan is not made or issued by a government entity. This is referred to as a non-GSE loan, a non-government sponsored entity. A government loan consists of FHA and VA loans.
A conventional loan usually does not provide much wiggle room when it comes to credit scores and down payment requirements.
Conventional portfolio loans
This type of conventional loan is held directly by the mortgage lender and can not be sold to investors like other conventional loans. Because of this, lenders tend to have a bit more freedom on deciding qualifications which can make it easier for borrowers.
Sub-prime conventional loan
These are loans offered to individuals with poor credit. Usually, the interest rates and fees associated with sub-prime loans are high.
Amortized conventional loans
Any credit union, bank, or mortgage broker that funds or brokers its own loans can offer an amortized conventional loan.
What is important to note is the LTV, the loan-to-value ratio. This indicates how much the loan represents the property’s value. The LTV can be greater than 80 percent, but that would require the borrower to purchase private mortgage insurance.
A fully amortized conventional loan is a mortgage in which the same amount of principal and interest is paid every month from the beginning of the loan to the end.
Adjustable conventional loans
The interest rate on these types of loans are adjusted to keep up with the economy. Typically, the loan is fixed for the first three to seven years and then it will turn into an adjustable-rate loan.
Conventional loans are a great option for borrowers with excellent credit, who can contribute at least a 3% down payment. Always be sure to explore your other loan options before committing.
