Pros of a conventional mortgage loan
A conventional mortgage loan is a type of home loan that meets certain standards set by the United States government. These type of home loans however are not guaranteed or insured by the government. conventional loans are basically any loan that is not an FHA loan or a VA loan. About 35% to 50% of mortgages each year are conventional mortgages.
Conventional mortgages allow for more financing options over VA and FHA loans. Fore example not only do they offer fixed rate mortgages but there are also various adjustable rate mortgages (ARM) and biweekly payment options available.
Because conventional loans have less strict guidelines they offer many other advantages such as underwriting flexibility, cheaper loan fees, less collateral, more lenient appraisal guidelines, and possible lower closing costs.
If a lender decides to keep the loan in their own portfolio they can offer more underwriting flexibility. Since the loan won’t be sold in a secondary market those guidelines won’t have to be met. This makes getting a loan easier with less than perfect credit.
Lenders may also discount certain loan fees or even waive them in certain cases. Since the lender will be keeping your loan they may discount loan fees in order to get your business.
Conventional loan lenders will sometimes let you use other items in the house as collateral. For example including appliances and furniture may be an option.
FHA and VA loans require strict appraisal guidelines. Conventional loan appraisals are much more flexible and only have to meet the lenders restrictions.
Finally, sometimes lenders will pay a portion or all of the closing costs of a conventional loan in exchange for a slightly higher interest rate. This allows someone who doesn’t have a lot of cash on hand to still purchase a home with less out of pocket money.
As you can see there are many advantages to conventional mortgage loans. Before you decide which type of loan to choose review all of your options. Everyone has a different financial situation so a conventional loan may not be your best option. Research other types of loans before making the final decision.
Categories: Personal Mortgage Articles Tags: ARM, conforming loan, conventional mortgge, equity, fixed rate, interest rates, Mortgage loan, non-conforming loan
Negative Amortization Mortgage Loan Information
A negative amortization mortgage loan or NegAm as it is sometimes refered to is basically when aloan payment for any period not enough to cover the interest charged over that period of time. This causes the outstanding balance on the loan to increase instead of decrease with each payment made. This type of loan is most often used as a mortgage loan by a corporation, and are sometimes referred to as PIK loans. Negative amortization mortgage loans usually only have this negative amortization schedule as an introductory period and once it expires a larger payment must be made in order to avoid default on the loan.
The purpose these types of loans are usually for advanced cash management or short-term payment flexibility. Negative amortization mortgage loans are not set up or desigend to make a mortgage more affordable. Usually the introductary negative amortization period is no more than 5 years and at this time the loan must be “recast” or setup on a fully normal amortization schedule.