A conventional loan refers to a mortgage not backed or guaranteed by the federal government, making it a popular choice for financially stable borrowers with a steady job, income, and the ability to afford a down payment. Unlike government-backed loans with terms set by the federal government, Kal Duwage Mortgage Inc. establishes the terms for conventional loans directly with the borrower.

When comparing conventional and FHA loans, conventional loans are often preferred for new home purchases and refinancing. While FHA loans may be more accessible for first-time homebuyers due to lower credit and financial requirements, conventional loans become advantageous with a 20% down payment. They offer flexibility, fewer restrictions, and more customizable terms.

Kal Duwage Mortgage Inc. conventional loans come with several advantages. They are easier to apply for, require less paperwork, and have fewer regulations. Borrowers enjoy more options, flexible terms tailored to their financial situation, and the ability to use the loan for various property types. A significant down payment (at least 20%) eliminates the need for mortgage insurance, and the interest rates are often lower for financially stable borrowers.

There are two main types of conventional loans: fixed-rate and adjustable-rate mortgages. Fixed-rate mortgages provide a stable interest rate for the loan’s duration, with common terms of 15 and 30 years. On the other hand, adjustable-rate mortgages have a changing interest rate after an initial fixed period, making them suitable for those not planning to stay in their home long-term.

The minimum down payment for some conventional loans is 3% of the loan amount. While private mortgage insurance (PMI) is required for down payments under 20%, it can be removed once the borrower has built up 20% equity. Sellers may prefer conventional loans as they often involve higher credit scores and larger down payments, presenting the buyer as a lower default risk and a more trustworthy candidate.