Conventional borrowing

When it comes to mortgages, it is best to stick with convention. That’s because conventional loans always carry the most favorable home mortgage rates. Going outside the box, so to speak, could cost you a lot of money.

Basically, the things you need to know about conventional mortgages is that (a) you must qualify as a borrower, and (b) there is a cap on the amount you are allowed to borrow.

First, you must qualify as a borrower. That usually means that your finances have to be in pretty good shape. In other words, your credit should be excellent, your income should be stable, and your debt should be low. Having kept up with your payments to other creditors and having a consistent employment history will go a long way toward helping you qualify.

Also, there is a cap on the amount of money you will have access to. If you are buying a particularly large or costly home, then you might have to turn to non-conventional financing, i.e., a jumbo loan. While this is certainly an option, you will definitely not be able to secure the best home mortgage rate.

The reason that conventional loans are governed by these restrictions is that your mortgage must be saleable on the secondary mortgage market. Many mortgage lenders elect to sell your mortgage after it has been processed.

The majority of these sales take place on the secondary mortgage market. Secondary mortgage market investors need assurance that you will be able to repay your mortgage. That is why organizations like Fannie Mae and Freddie Mac devise policies that help screen out borrowers they consider to be too risky for taking on a mortgage.