Our previous post discussed the advantages and disadvantages of FHA mortgages. For comparison purposes, today we’ll cover a conventional mortgage.

Conventional mortgages are the most common way to finance a house; thus the word “conventional;” they are sometimes called conforming loans. They are any loan that is not insured or guaranteed by the federal government.

This type of loan is usually written as a fixed rate and for a 30-year term. However, more recently they are also being written with adjustable rates and for shorter (15 or 20 years) terms.

Thumbs up:

• Loan fees can be negotiated.
• Creative financing is an option.
• Fixed rates guard against inflation (if the rates go up, yours will remain the same).
• Higher immediate equity guards against a downturn in the housing market (as we are experiencing right now).

Thumbs down:

• Interest rates can be set by the lender, so they could be higher than FHA rates.
• Higher down payments are required.
• Fixed rates can be a negative if you purchase your house when interest rates are high and then are unable to refinance when they drop.

These are just a few of the key points of a conventional mortgage. There are many other options that a mortgage broker can share with you. Be sure to work with an experienced broker so you will receive the best advice and learn all of your options before making your decision.