As a result of the housing crisis, many mortgage lenders swung the pendulum a bit too far in the opposite direction. They went from handing out mortgages all too freely, putting homeowners, and the overall economy, at risk, to making their lending standards so strict that very few home buyers were able to qualify.
Things may be evening out a bit now, and that is good news for home buyers just entering the market. Whether you are looking for your starter home or moving up to your dream home, it is important to explore all of your options and make your decisions accordingly.
At this point you may be leaning toward one of the many government-sponsored mortgages on the market, including home loans offered by the VA and the FHA. In the end, however, you may find that a conventional loan is often the best choice, assuming you are able to qualify for the mortgage on the home you want.
There are a number of factors that can tip the scales in favor of a conventional home loan instead of an alternative financing option. Perhaps the most important is that a conventional loan means there will be fewer hoops to jump through. Working with government housing agencies can be frustrating at best, and if you qualify for a conventional home loan you can avoid all that.
Whether you are in the market for a condo in Phoenix AZ or an estate in Minneapolis MN, a conventional loan can also give you more flexibility than a mortgage written by a government agency or an alternative financier. You may have greater flexibility with everything from the required down payment to the length of the loan and the size of the monthly mortgage payment. This flexibility can be especially helpful if you are buying an investment property, but it will also come in handy if you are buying a piece of residential real estate.
Buying with a conventional loan can also force you to be more realistic when setting your maximum price range. The low down payment requirements of an FHA loan can be somewhat of a double-edged sword, tempting some home buyers to choose a more expensive home than they could otherwise afford.
That could be a problem if home prices go through another period of value declines – just ask anyone who lived through the latest housing crisis. If you want to reduce your risk and make the most of your money, there are solid reasons to choose a conventional home loan.