Conventional Mortgage Loans Offer Many More Options
Conventional mortgage loans are an alternative to FHA loans which tend to offer a lot more variety.
With a conventional loan, which includes both conforming and non-conforming loans, you can get your hands on pretty much anything from a 1-month ARM to a 30-year fixed, and everything in between.
So if you want a 10-year fixed mortgage, or a 7-year ARM, a conventional loan will be the way to go.
Conventional mortgages also aren’t capped at a certain loan limit, assuming they are non-conforming. For those who need a true jumbo loan, a conventional mortgage will be the only way to obtain financing.
No Mortgage Insurance Requirement on Conventional Mortgage Loans
Conventional mortgage loans won’t be subject to mortgage insurance premiums, assuming you put 20% down, or have at least 20% equity when refinancing.
Even if you’re unable to put 20% down, there are low down payment programs that don’t require mortgage insurance.
Fannie Mae Homepath program only requires a three percent down payment and does not require mortgage insurance (the DP requirement has since been increased to 5%).
However, there are select lender programs that offer 3% down with no MI, so in some cases you can put down even less than an FHA loan without being subject to that pesky mortgage insurance.
Generally, conventional mortgages require a down payment between five and 20 percent, so low down payment borrowers will still want to consider FHA loans first.