Considered king under cash by many agents, a conventional loan typically gives buyers an advantage. But why? What is it about this loan type that usually makes it a better option than other types of loans? While we always recommend that you consult a lender directly for any questions you have about the best loan for your particular situation, here are the top reasons we have seen in our local market for why conventional loans are the most favored in today’s market—both by sellers when considering offers and for buyers who are purchasing a home. 

1. Conventional loans don’t require repairs.

 Conventional loans don’t allow the appraiser to require any repairs the way that other loans (FHA VA, etc) do. While these repairs are not particularly common and are usually very small, the concern that the seller might have to do something to the property to make it eligible for closing. Common repairs include plumbing leaks, missing handrails, cracked window glass, and others which can be found in the link located here.

2. Conventional loans have a higher credit minimum.

According to NerdWallet, in most cases, you’ll need a credit score of at least a 620 to qualify for a conventional loan, while FHA qualification goes down to 500, depending on how much money you’re able to put down. While credit obviously doesn’t directly correlate to whether a person will be able to follow through with the purchase, it’s just another small bump that may put a conventional loan ahead of other loan types in a multiple offer situation. This certainly isn’t always fair, but since this is something that seems to be happening in our market, we here at Homes By Valor just want to make sure that you have all of the information you need to make yourself as competitive as possible in any multiple offer situation.

3. You can avoid PMI when using a conventional loan.

Unlike other loan types like FHA where PMI will exist as part of your payment for the lifetime of the loan, when getting a conventional loan, PMI is not an inherent part of the payment. For example, if you are able to put down 20% up front, you won’t ever need to pay a cent of PMI. Even if you can’t muster that 20% up front and can only pay 5% or 10%, you’ll still come out on top since that PMI disappears once you get to 20% threshold. 

4. Unique properties are more likely to qualify. 

While you will need to ask a lender about each property you have a question about, in general, conventional loans are more open to unique situations such as multiple buildings on a property, strange architectural styles, or properties in need of some more serious repairs. While cash is of course preferable in these situations, if that’s not an option, usually a conventional loan gives you the most options, with the exception of an FHA 203K loan, which although amazing on paper since it gives you room to do renovations within the purchase price budget, doesn't often appeal to sellers since there are a lot of hoops to jump through before the mortgage can be fully approved.

We hope you found this information helpful and that you’ll consult a lender for any questions about your particular situation to see if the conventional loan is the best option for you. Please reach out to us if you’re ready to start looking for homes. You can reach us at (678) 242-9981. We can’t wait to help you on your home purchase or selling journey!