Minimum down payment on a conventional loan
A conventional mortgage can require a sizable down payment in comparison to other types of mortgage loans. Conventional lenders have traditionally required up to 20% for a down payment, but now they can offer a 3% down payment program to compete with the 3.5% minimum down payment option for an FHA loan. Down payment requirements can vary based on the lender as well as the borrower’s credit history.
In addition to the down payment, borrowers are often responsible for origination fees, mortgage insurance and appraisal fees. As such, conventional loans tend to have a higher out-of-pocket cost at closing than other types of mortgage loans.
Conventional loans are an excellent option for borrowers with strong credit who can contribute a down payment of at least 3%, or perhaps quite a bit more.
In summary, A conventional loan can be the most cost effective loan as the opportunity to drop mortgage insurance can save a client money in the long term. However, its guidelines are a bit more stringent than the government-insured loans and can cost client’s money if they are having to wait to purchase a home in an increasing rate and home appreciation environment.