Conventional Loans

Memphis, TN - The Karlton Govan Lending Team

If you’re looking for 15 or 30 year fixed rate conventional mortgage loan in Memphis, TN, you’ve come the right place!

How a Conventional Loan Works

In the quest for a mortgage, many people first research their options for a conventional loan. These loans are called “conventional” because they follow the same structure of a basic loan without any adjusted requirements or repayment structures.

15 Year Loans vs. 30 Year Loans

One of the most important considerations when it comes to a conventional loan is whether it should be a 15-year loan or a 30-year loan.

If you can afford a higher monthly payment, a 15-year loan may be the better choice. This is because you will be paying for a shorter amount of time (15 years) and you will be paying less overall for your home. The amortization schedule causes the overall payment to be less, but also 15-year loans mean a lower total of interest paid than 30-year ones.

However, if you’re unsure as to whether you’ll be able to afford a 15-year mortgage, you can always opt for a 30-year one and then put any extra money towards the principle.

Fixed Rates vs. Adjustable Rates

A fixed rate means the rate you get at closing is the same rate you will have for the life of the mortgage.

An adjustable rate means your rate can go up or down during the course of the loan.

While there are financial benefits to an adjustable rate mortgage, many homeowners choose a fixed rate because they want to eliminate the risk of their mortgage payment increasing to a level with which they are not comfortable in the future.

However, there are no set rules, and advantages can be found with both types of rates.

Income and Credit Requirements

A conventional loan requires a down payment of anywhere from 3% to 25%.

However, the only way you will get a 3% down payment is if you meet certain specifications and income and credit requirements.

That means you are typically paying more up front for a conventional loan than an FHA, VA, USDA or other type of loan. You are also required to keep the ratio between how much debt you are paying each month and how much you make relatively low. A figure as low as 36% is common.

All things considered, many people prefer conventional loans because they get a lower interest rate and more equity in their home. Ultimately, it’s up to the homebuyer to decide what’s best for him or her.