Conventional Home Loan Mortgage

What is a Conventional Loan?

           Conventional loans normally require larger down payments than government backed loans (such as FHA and VA). Traditionally the down payment for a conventional loan is 20%, which is why many consumers favored government backed loans.
           To lure more borrowers to the conventional loan market, the concept of a Private Mortgage Insurance (PMI) was developed in the 1950’s.  
             If you are unable to put down 20% of the purchase price, you may be required to pay a PMI, in addition to your regular loan payment. This insurance is to protect your lender, should you default. Therefore, if you have purchased a $200,000 home, with 5% down, and financed 95%, at 6% interest for 30 years, you would expect to pay approximately $1100 a month, PLUS PMI on the 15% that you didn’t put down, to make up the 20% down payment.
           When the principal on your property has reached 80% of loan to value, you may be able to have the PMI removed.
           Conventional lenders may also include prepayment penalties, which means that if you pay off your loan before the penalty period expires (which might be one to five years), you will pay a cash penalty.

Other Real Estate
Links of Interest

What is a FHA Home Loan?
As a buyer, do I need a Realtor?
Do I need a Realtor to sell real estate in Lake Havasu City?
Home Loans
What is a VA Loan?
Home Loan Frequently Asked Questions Lending FAQ
Mortgage Interest Rates