FINANCING OPTIONS FOR CONVENTIONAL BORROWERS

Many borrowers don’t realize that “conventional” mortgages still follow strict qualification rules.

And depending on the lender, the guidelines can vary more than you think.

Here’s what conventional borrowers need to understand 👇

1️⃣ High ratio vs. conventional — the real difference

High ratio means less than 20% down and mortgage insurance is required.

Conventional means 20% or more down and typically no insurance premium.

✔️ insured mortgages add a premium

✔️ conventional avoids the extra insurance cost

✔️ some rental and specialty loans still require insurance

The down payment amount determines how the mortgage must be structured.

2️⃣ Why some conventional mortgages are still insured

Many lenders insure their conventional mortgages even when the borrower puts 20% down.

This is done behind the scenes and doesn’t cost the borrower directly.

✔️ mortgage companies use insurers to reduce risk

✔️ some lenders need insurance to access investor funding

✔️ borrowers often don’t know their loan is insured

Insurance affects how the mortgage must be qualified.

3️⃣ How qualification changes based on the lender

Some lenders must qualify borrowers at a stricter benchmark rate.

Others can still use more flexible guidelines.

✔️ mortgage companies may require benchmark qualification

✔️ banks may allow qualification using the contract rate

✔️ amortization options depend on lender policy

This means two lenders can approve two very different amounts for the same borrower.

4️⃣ Amortization options impact affordability

Conventional mortgages may allow longer amortizations depending on the lender.

Longer amortization reduces the monthly payment.

✔️ 30-year amortization available with some lenders

✔️ some still allow 35-year amortizations

✔️ insured conventional loans may be restricted to 25 years

Longer amortization = lower payments = higher borrowing power.

5️⃣ Pricing differences between banks and mortgage companies

Banks and mortgage companies operate differently, which affects interest rates.

✔️ banks may charge premiums for 30-year amortizations

✔️ mortgage companies may adjust pricing based on insurance rules

✔️ rates can shift quickly based on market changes

Changes in insurance requirements can raise rates across the board.

6️⃣ Why competition still protects borrowers

Even when rules tighten, the mortgage market still offers choices.

✔️ lenders adjust products to stay competitive

✔️ alternatives exist for rentals and self-employed borrowers

✔️ brokers can access multiple lending channels

The “best option” is different for every borrower.

💬 Final Thought

Conventional mortgages aren’t always as simple as they seem — different lenders follow different rules, which can affect approval, payments, and rates.

If you want to compare all your options clearly, message The Frontline Mortgage Group anytime. 💬