Conventional Mortgages

Loans not insured by the government and follow rules set by Fannie Mae or Freddie Mac are usually called conventional loans.

In contrast to FHA loans, a conventional mortgage has debt to income ratios of 28% and 36%.

For conventional loans, your monthly housing costs should not exceed 28% of your gross monthly income. Total housing costs include mortgage principal and interest, property taxes, and insurance. Those four terms grouped together, and referred to as PITI.

Your total monthly costs, adding PITI and long term debt, should be no more than 36% of your gross monthly income. Long term debt includes such things as car loans and credit card balances.

Benefits of conventional loans :

1. Typically, lower interest rates.
2. Quicker closing dates.
3. Less inspections required.

Drawbacks of conventional mortgages :

1. More down payment required.
2. Higher credit score requirements.

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