What is a Conventional Mortgage?
A conventional mortgage is the type of mortgage that applicants with good credit scores and enough savings for 5 - 20 percent down payment generally opt for.
Conventional mortgages can be either fixed rate or adjustable rate.
- Fixed-rate mortgages lock in the interest rate at mortgage closing and the homeowner pays that same interest rate for the life of the loan. The length of the loan can be between 15 years and 30 years for a fixed-rate conventional loan.
- Adjustable rate loans can be for three, five or 10 years, as the rates will reset themselves at the three-, five- or 10-year point. Adjustable rate conventional loans are best suited for those who plan to move in three to five years, as the mortgage process needs to be redone when the rate is reset.
The most popular conventional mortgage is a fixed-rate, 30-year loan, as it gives the homeowner a consistent figure to budget with, as the payments will remain consistent throughout the life of the mortgage.
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