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Who they’re for: Conventional mortgages are ideal for borrowers with good or excellent credit.
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How they work: Conventional mortgages are “plain vanilla” home loans. They follow fairly conservative guidelines for:
- Borrower credit scores.
- Minimum down payments.
- Debt-to-income ratios.
Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.
Cost: Closing costs, down payments, mortgage insurance and points can mean the borrower has to show up at closing with a sizable sum of money out of pocket.
Find out more about closing costs and how to save money.
What’s good: Conventional mortgages generally pose fewer hurdles than Federal Housing Administration or Veterans Affairs mortgages, which may take longer to process.
What’s not as good: You’ll need excellent credit to qualify for the best interest rates.