The reason Conventional mortgages are sometimes referred to as UK Mortgages is because they are typically issued by a government agency. While the Department for the Treasury is the lead organisation for the provision of these mortgages, other government agencies also issue them. These agencies include the Bank of England, the Central Banks of Australia and the Government of Ireland. In addition, some commercial banks and building societies also offer this type of mortgage.
A Conventional mortgage is a mortgage that you can obtain even if you have a bad credit rating. There are two types of Conventional mortgages; namely, the Fixed-rate mortgage and the Adjustable rate mortgage. With a Fixed-rate mortgage, you will qualify only if you have a good credit score and even if your credit rating falls in the second half of the period for which you opt for a loan. Similarly, with an Adjustable rate mortgage, you will qualify even if your credit rating falls in the second half of the term. However, if your credit rating falls considerably after the first year of the mortgage, then you might have difficulty qualifying for a fixed-rate mortgage.
Generally, Conventional mortgages are available on different terms and conditions depending upon the lender and the type of home loan. The usual Conventional mortgages include; first time buyers’ mortgages, repayments options, loan to value policies, interest only mortgages,guardian gifts mortgages and repayments based on income policies. Moreover, there are also some special mortgage products available under government schemes such as the Help to Buy home loan scheme, the first time buy-to-let mortgage and the third time home loan. In addition to the mortgage products listed above, there are certain secondary Conventional mortgages that are listed under government schemes as well.
When it comes to assessing the cost of a mortgage, the first thing that a buyer considers is the interest rate or the repayment rate. The rate of interest provided for Conventional mortgages is determined by the lending authorities based on the prevailing global economic conditions, prime rate, inflation and other factors. Since home loans are secured home loans, the lenders usually charge higher rates of interest. Hence, it is important to evaluate the cost of a mortgage including Conventional mortgages based on the rates and the variables such as the amount, term and the type of the mortgage.
To know the cost of a mortgage, the buyer must evaluate the affordability of the repayment and the rate of interest. In addition, the buyer must evaluate the size of the loan and the cost of the down payment. The lender usually does not give more money away on low-value loans and mortgages. Consequently, the buyer must do a thorough analysis of all the factors that will affect the cost of a conforming conventional mortgages. A key factor that affects the cost of a mortgage is the borrower credit score.
A good credit score will provide the lender with a fair picture of the dependability of the borrower. Therefore, a high credit score is necessary if you want to avail of lower interest rates on conforming conventional mortgages. The maximum costs of conventional mortgages are associated with the loan processing and closing fees. The seller or the lender will recover these costs through the PMI premiums charged by the PMI company.
The government-backed mortgages and the conforming loans are offered by the government or the participating mortgage insurance companies in the market. The government-backed mortgage insurance company is set up by the United States Department of Veteran’s Affairs and the Federal Housing Administration. These government-backed mortgage insurance companies do not have private financial institutions under their umbrellas; they are directly dependent on the government. As a result, the government-backed mortgage insurance companies reduce the interest rates of the conventional mortgages which are still below the market rates.
It is important for the borrowers to compare the interest rates offered by the lender to the prevailing market rates. If there is a discrepancy in the quotes, the borrowers must meet the minimum eligibility criterion. The criteria to qualify for the conventional loans mortgages include: the homeowners must meet the home income guidelines, the homeowners must meet the home value guidelines, the homeowners must meet the credit guidelines, the borrowers must meet the home loan repayment guidelines, and the homeowners must meet the foreclosure or loss mitigation guidelines. This article is designed to help the potential homeowners understand the benefits of the government-backed mortgages and the pitfalls of the conventional loans mortgages.