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Conventional Loan 

There are many loan programs that are available to the consumer today.  None has been around longer or held up better than the conventional loan.   The conventional loan is probably the same kind of loan your parents and grandparents got when they bought their homes, and it is still the most widely used loan product available today. 

 

In general, a conventional loan is a fixed rate loan that runs for a term of 15, 20, or 30 years.  The interest rates are based on the market's prime rate.  The conventional loan programs are quite standardized and require standard information and requirements for qualification.  Basically, a person must have an excellent credit rating, a steady job history, a reasonable debt to income ratio, a steady income, and must have between 10 and 20% of the amount of the loan to use as a down payment, since this type of loan will only lend 80 - 90% of the total value of the property in question. 

 

Conventional loans can be used for a mortgage refinance, a bad credit mortgage loan and new home purchases.  When mortgage refinancing, you may not need the down payment if you have enough equity in the home to include in the loan or if you are doing a streamlined refinance through your current lender.  Because this loan is straightforward and standardized, it is a consistent offering from all lenders.   This type of loan has been around for years and will be around for many more.  There is a reasonable amount of risk on the part of the lender, and the borrower begins with equity in his home. 

 

You should be able to find conventional loans through every lender that you contact.  This means that the lenders are competing for your business and that helps the rates stay lower so that the banks can stay competitive.  This type of competition is very helpful to the consumer, since you are looking for the best rates on a home loan.  If you find a lender offering a much higher rate on a conventional loan than others are offering, that is a red flag to stay away.  Competition may mean that some lenders are lowering their closing costs in order to entice you to use them for this standardized loan.  This means that it can really pay off for you to shop around for the lender with both the lowest interest rates and the lowest closing costs.  Be sure to look at the APR rather than the simple interest rate when comparing costs from one lender to another.