Mortgage Type Activity
Not all mortgages are the same, and it's important to understand the benefits and disadvantages of each mortgage type before purchasing a home. This activity will explain each mortgage type individually and provide pros and cons for each one. Use the dropdown arrow to select the mortgage you'd like to learn about.
No bells, whistles, or fine print here. A conventional mortgage is a standard loan that isn’t backed by the Federal Housing Administration (FHA). It’s the most straightforward type of loan that gives you the money you need to buy a house, which is paid back over the life of the loan, usually during 15, 20, or 30 years.
Conventional loans usually require you to purchase private mortgage insurance. It’s basically an insurance policy that covers your lender in case you can’t pay the money back. That can increase the overall cost of your loan, but conventional loans usually require less borrowing and lower closing costs than other types—even if the interest rate is slightly higher.
- Simple, straightforward terms
- Lower closing costs
- Rewards good credit with good rates
- Interest rate may be higher than that of other loans
- Requires higher down payment than other loans
- Requires private mortgage insurance
Conventional loans are ideal for borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.
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